Pension schemes in need of their own superhero

The primary difficulty is the scale of change. In the UK and the Netherlands, Europe’s two biggest pensions markets, national authorities have embarked on overhauls of their systems. In the UK, the Government has decided to coerce companies into the paternalistic provision of pensions for all under the auto-enrolment plan, something from which many had been beating a retreat due to the onerous funding regulations.

In the Netherlands, the Dutch authorities have opted to relax funding standards – possibly at the cost of guaranteed benefits – to try to preserve a system acknowledged as one of Europe’s best.

Further east, governments have even begun to view pension funds as a source of capital to plug holes in their own budgets. At a recent conference in Frankfurt, Joanne Segars, chief executive of the UK’s National Association of Pension Funds and recently elected chairman of PensionsEurope, the EU-level trade association, reminded delegates of Hungary’s “effective nationalisation” of €10bn of private pension funds in 2011. Similar moves are now afoot in Russia.

At the same time, central banks have made the lives of pension schemes even more difficult with aggressive monetary easing policies. These are intended to save the wider economy from disaster but come at a cost for pension funds; by keeping bond yields low, monetary easing makes the pension liabilities, calculated using bond yields, appear much larger.

EU authorities are also persisting with efforts to add their own supranational pensions regulation. The European Commission remains publicly committed to the introduction of new funding standards based on the regulation that governs the insurance industry, Solvency II. The Commission is demanding a draft directive within seven months.

The speed of this timetable fills the pensions industries in the UK, the Netherlands and Ireland with dismay: the CBI recently warned the proposed reforms were a “disaster” that would cost the UK economy ￡350bn and 16,000 jobs.

The industry’s trade associations have been fighting battles on multiple fronts. Mike Taylor, chief executive of the ￡4.2bn London Pensions Fund Authority, said: “The trade associations are under-resourced, so pension funds find themselves relying to a large extent on the lobbying efforts of the fund managers.

“Firms such as BlackRock and JP Morgan do a lot putting the buyside’s case to regulators and Insight Investment has been particularly good too on European swaps and derivatives reforms.”

Europe’s biggest pension funds – which include the Dutch megafund ABP, with €240bn under management – have the scale to employ their own public affairs staff and make their own representations to regulators.

Managers certainly have an interest in lobbying on the more technical aspects of financial market reform and they have been involved in EU consultations on everything from new derivatives rules that threaten pension funds’ liability-hedging strategies, to new rules on corporate governance that call for schemes and managers to do more and disclose more of their efforts to hold company managements to account.

Taken together, the increased burdens of funding and governance could threaten the survival of the occupational pensions sector. The insurance industry stands ready to absorb the pension obligations companies no longer want or can afford.

Guy Freeman, co-head of business development at Rothesay Life, the buyout insurance subsidiary of Goldman Sachs, said: “It does create opportunities for us in the sense that corporates are becoming more focussed on settling their pension liabilities because of the complexity – and the gradually increasing scrutiny – they are facing. It reinforces the trend of money moving from the pensions sector to the insurance sector. This is a multi-year and a multi-decade trend.”

Last week, Rothesay struck this year’s biggest pensions buy-in with the Merchant Navy Officers Pension Fund. It is a partial buy-in, Rothesay agreeing to pay pensions only to the funds’ retired members, in return for a portion of the funds’ assets. The insurer is taking on 40,000 retired seafarers and ￡680m of assets.

But lobbying from the UK industry is not all without success. In October, the UK’s National Association of Pension Funds suggested a temporary relaxation of discount rates – the bond-yield-based rates used by funds to estimate their liabilities – and two months later, in his Autumn Statement, the Chancellor George Osborne announced these would be reviewed.

Three major upgrades include the furnace, windows and insulation and draft proofing the attic. The havoc is condensation on the inside of new windows, even when old aluminum framed windows are replaced with vinyl framed windows.

High-efficiency furnace: These no longer takes combustion air from the basement or furnace room area, removing moist air that has settled in the furnace area through the combustion process, thus reducing the moisture in the home. High-efficient furnaces draw combustion air through plastic pipes from the outside directly to the combustion chamber, and have a continual flow furnace fan to maintain a balanced ambient temperature.

Windows: New vinyl windows, if installed properly, are tight and sealed to the house envelop to stop drafts, as well as any excess humidity - or moisture - from being exhausted out around the old frames.

Insulation and draft proofing: Many homeowners have had insulation upgrades in their attics with NO draft proofing. Draft proofing is done before insulation upgrades are complete by caulking and sealing around electrical house wiring coming up through partition and exterior walls of the home, sealing vent stacks, light fixtures, plumbing stacks, chimney stacks and exhaust ventilation ducts. When draft proofing is overlooked, one sign would be dark stains on the underside of roof sheathing in the attic cavity. This movement of air containing moisture is pushed into the attic cavity by the forced air furnace when operating, pressurizing the home and pushing air anywhere there is a weakness .

Taking all three upgrades into consideration, review your home as a system. The question is: What did you do about the humidity building up inside your home if you didn't address the exhaust ventilation in the bathroom, kitchen and any moisture created within the home?