He warned that the current returns could be seen as factor that would reduce future returns, particularly for bonds.“It is important that the sector remain vigilant,” he said.“Persistently low interest rates will bring about lower returns in the future. Seeking more profitable asset classes must go hand-in-hand with better risk management.”In Belgium, changes are in the offing concerning a distinguishing feature of the workplace-based pension system.This is the present application of legal provisions, under the Loi relative aux pensions complémentaires (law on occupational pensions).Neyt has described this law as making Belgian occupational schemes a “compromise” between defined benefit and defined contribution. The law, dating from 2003, obliges employers to achieve a nominal return of 3.25%, not taking into account inflation. This means employers may have to top-up funding to reach the target.Neyt pointed out that this burden on employers was set during the 2003-04 period, when inflation, at 2%, reduced the effective cost to employers.But now inflation is slightly negative, which is resulting in political pressure to relax the law, which could well be realised.Neyt also called for a reform of the guaranteed legal minimum return on pension fund contributions, which he said should be fair, transparent and easy to manage.As of the end of December 2014, the average asset allocation for a pension fund in the BAPI sample was 47% in bonds, 34% in equities, 13% in ‘other’ investments (mainly insurance, infrastructure, private equity and convertible bonds), 5% in real estate and 2% in cash. Belgian pension funds nearly doubled their investment returns last year over the year before, with average gains of 11.86% compared with 6.73% for 2013, according to the Belgian Association of Pension Institutions (BAPI).BAPI said the continued low level of interest rates boosted overall returns for the 52 pension funds surveyed.The 11.86% return figure is provisional, based on reports from individual funds with a capital value of approximately €14bn (the total under management is around €20bn).Yet BAPI president Philip Neyt said he did not expect to see, when the final figures are consolidated in April, any serious change in the present figures for 2014.
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