The Weekly Wrap: January 12 edition

Pension lawsuit over student loan misdeeds forces Navient governance changes

 Fundfire: The Buffalo Grove Police Pension Fund has reached a settlement with Navient Corporation and members of its board to resolve a lawsuit claiming that board members and executives had breached their fiduciary duties by allowing the company to manipulate its student loan servicing and collection practices to mislead borrowers. As part of the preliminary settlement, Navient’s board agreed to make corporate governance changes and to appoint two new independent directors, among other measures. The defendants agreed to pay a $5,000 (£3,902) service award and plaintiff’s attorneys fees as awarded by the court, not to exceed £1.5m, but the settlement did not include damages. “We continue to reject these allegations as unfounded, and chose to resolve this matter now to avoid the high cost of litigation,” a Navient spokesperson said.

UK fiduciary manager hiring grinds to a near halt as uncertainty bites

 MandateWire: Asset inflows into UK fiduciary management mandates dropped to a five-year low last year following the UK Competition and Markets Authority’s investigation into the fiduciary management and investment consultancy sector. According to MandateWire data, during the year ending June 30 2018, asset inflows into fiduciary management mandates decreased to just over £1bn, from the highs of almost £1.6bn recorded in the 12 months to June 30 2016. Only three pension schemes; the circa £315.8m University of Bristol and Assurance Scheme, the £600m IPC Media Pension Scheme, and the £100m National Farmers’ Union of England and Wales (NFU) Staff Pension Scheme, announced fiduciary management appointments during the year ending June 2018. MandateWire data support the findings of a recent KPMG UK fiduciary management survey, which revealed a reduction in the number of new mandates awarded to fiduciary managers.

Aussie supers and regulators slammed for failing members

 Ignites Asia: Australia’s superannuation fund industry and the regulators charged with overseeing it were slammed in a recently released government report for leaving members ill prepared for retirement. The Productivity Commission report laid out 31 recommendations for a range of concerns, including poor performance, high and unnecessary fees, lack of transparency, overabundance of products, weak competition, proliferation of unnecessary accounts, unjustified insurance premiums, and regulators doing a poor job of protecting members. Members who have paid into their super funds for decades are paying a high price, but tackling two areas in particular – entrenched underperformers and unintended multiple accounts – could make a massive difference for millions who are getting short-changed. One-third of accounts are unintended multiple accounts that cost members A$2.6bn (£1.5bn) a year in needless fees and insurance.

Pension scam cold callers face fines of up to £500,000

 FT: Companies that make cold calls to people about their pensions face fines of up to £500,000 under new rules that came into force on Wednesday. The cold-calling ban is designed to prevent fraudsters conning savers out of their pensions, and companies making illegal pension cold calls will be subject to enforcement action and fines. According to the Financial Conduct Authority, victims of scammers lost an average of £91,000 last year, with cold calling a common tactic to contact people. The risk of savers losing their pension pots to scammers has risen since the introduction of freedom and choice reforms in 2015. The government said the ban would not prevent companies – such as businesses authorised by the FCA, and pension funds – from making pension-related calls if the recipient has consented to calls or has an existing relationship with the caller.

Korea's NPS sets up stewardship division and enacts code

 Ignites Asia: After setting up a new department dedicated to fulfilling its stewardship responsibilities in late December, South Korea’s National Pension Service will actively exercise the code for the first time, according to local reports. The global responsibility and governance division, which currently comprises nine members from the responsible investment team, will help strengthen the role the NPS plays in improving corporate governance in hundreds of local companies. The new division, which is led by Sung-Jae Choi, will consist of about 30 executives once it is fully staffed. The NPS made the move to adopt the stewardship code in July 2018, after it was introduced by South Korea’s Corporate Governance Service in late 2016. Doing so has given the country’s largest institutional investor greater impetus to exercise its rights in dismissing and selecting board members of companies that it invests in.

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Tweet of the week

Taking a closer look at the pension tracing service today. Hadn't realised how unhelpful it is. Not built with the consumer experience in mind... can only hope dashboard(s) are allowed to be developed to revolve around the needs of pension members.

— Nathan Long (@LongPensions) January 11, 2019