1
INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
WORLD PENSION ASSOCIATION (WPA)
INVESTMENT
RESTRICTIONS TO
PENSION FUNDS
APRIL 2002
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
2
INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
EUROPE
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Country Characteristics same
Total total
issuer
Austria Equities, options & convertible bonds 50
foreign equities 30
1
(Only assets held foreign assets 50
in Pensionskassen) real estate 20
loans to sponsoring company 10
in EMU fixed interest securities- 35
2 3
Belgium bonds issued by states or firms not belonging to zone A 10
mutual investment funds not subject to legislation of an EU Member
10
State (Directive 85/611/EEC)
non-quoted values 10
real estate certificates 5
options, futures and other derivatives not used for hedging 5
non-guaranteed loans 1 5
direct real estate in one value 10
equities, bonds from one issuer and/or loans to one borrower 5
equities, bonds, loans issued by sponsoring employer (self-investment) 15
4
Denmark so-called “High Risk assets” (see annex 1) 50
unlisted certificates (shares etc.) and other securities which are listed
10
in countries not belonging to Zone A (included in the 50% above)
total technical reserves which can be invested in one single
issuer/debtor remains in place, 2
excl. mortgage credit institutes 40
currency matching rule (of which 50% can be in EURO or in an EU
80
currency)
No restrictions
1
Non-Euro currencies and bearer bonds, foreign currency deposits in Austrian banks and cash held in foreign currencies
2
min. technical reserves = minimum reserves + solvency ratio + 60% of difference between plan reduction and actuarial reduction in case of early retirement
3
According to directive 89/647/EEC, the following countries are included in zone A: the countries of the EU, Hungary, Iceland, Norway, Switzerland, Turkey, Czech, the U.S., Canada,
Mexico, Japan, Australia, New-Zealand and Saudi-Arabia
4
changed end 1994 i.e. application of Third Life Insurance Directive in Danish Regulation
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Characteristics
Country Same
Total Total
issuer
Finland: quoted shares and bonds of companies domiciled in an EEA state
50
units in investment funds that invest their assets in shares and bonds
Main restrictions Bonds traded on a regulated market in an EEA state or issued by credit
of the Decree on institutions (excl. deposit banks) or corporations licensed or domiciled 50
the coverage of in an EEA state
the pension units in an individual investment fund 25
liabilities of Real property and shares in real estate corporations in an EEA state 40
pension real property and shares and holdings in real estate corporations,
foundations 70
mortgages on real estate in EEA
issued on property 25
23/12/1998 one single investment target 15
Units in an interest funds No limit
Currency matching 80
France: Insured
Fall under the restrictions of Life insurance Directive
schemes
France: AGIRC & Since 1994 the legal restrictions on investments have been abolished.
ARRCO However there is a set of internal rules, which apply to all of the
member pension schemes.
Germany: EU equities (including Germany) 30
Pensionskasse non EU equities 6
stock of any company 10
EU bonds 6
non-EU bonds 5
real estate (EU-wide) 25
deposits 10
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Characteristics Same
Country Total Total
issuer
Greece NO INFORMATION available – will be updated
Iceland foreign investments 50
Foreign and domestic equities 50
unlisted securities 10
one single investment target 10
Stock of a single firm 15
Shares in any mutual or equity fund 25
Ireland NO RESTRICTIONS ( see annex 2)
Italy NO INFORMATION – will be updated
Luxembourg NO RESTRICTIONS (see annex 3)
The Netherlands self-invested in the employing company – (no self-investment possible 5
for industry pension funds)
self-invested in the employing company (additional max.) 5
total assets of the pension fund that can be invested in the sponsoring 10
company
The restrictions relating to self-investment can be waived, if the
Insurance Chamber agrees, in situations where the employer has
taken on new financial obligations due to an increase in pension
benefits relating to years of past service.
Norway Equities 35
Shares in a single company 15
Results still need property 60
updating
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Characteristics Same
Country Total Total
issuer
5
Portugal equity or loans issued by the same company 5
in force since equity or loans (including bank deposits) issued by the same group of 20
January 31, 1998 companies
property investments being used by the Fund Sponsor or an associate 25
Any one property investment 10
(meaning limit to a group of real estate investment, that by its location
or functional dependency, can be considered as only one investment)
6
Stocks denominated in foreign currencies 20
Direct equity holdings 50
Unquoted direct equity holdings 3
Land and buildings 45
Land, property, property investment funds, mortgage loans, securities 50
bonds issued by companies whose incomes are derived from property
Bank term deposits and deposit certificates 30
Bonds and commercial paper, other than those issued by the 60
Portuguese State
Open or close ended unitised/pooled equity, bonds and mixed funds 30
(excluding property related) quoted in or outside Portugal
Mortgage loans 25
Spain Sum of equities, bonds, properties, credits with mortgages, banking 90
deposits listed or negotiated in organised markets
Banking deposits 15
Securities issued or guaranteed by the same entity 5
Sum of securities issued or guaranteed by the same entity and credits 10
granted or guaranteed by it.
Sum of securities issued or guaranteed by entities belonging to the 10
same group and credits granted or guaranteed by it.
Cash 1
No restrictions in equities or foreign investments
5
in some circumstances the limit may be increased to 10%
6
EURO denominated assets, whether or not quoted on the Lisbon Stock Exchange or issued by foreign companies are NOT treated as foreign assets.
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Characteristics Same
Country Total Total
issuer
Sweden “bigger Equities 25
friendly societies” Property 25
(“understödsfören- Fixed income 100
7
ingar”) Currency matching 80
Sweden: “small Equties 0
friendly societies” Property 100
(“understödsfören- Fixed income 100
ingar”) Currency matching 100
Switzerland NO RESTRICTIONS (see annex 4)
U.K. Self-investment 5
Any one unit trust 10
Unit trusts run by any one manager 25
7
Same restrictions as for life assurance companies (Third life directive)
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Annex 1
A. The so-called “high risk assets” are the following:
1) UCITS (EU Directive 85/611).
2) Other bonds and loans listed of public stock exchanges of Zone A (= OECD); (other than those considered “low-risk” and also belonging to Zone A such as
government bonds; listed bonds issued by international organisations: mortgage-credit bonds as well as other bonds issued in Denmark or similar bonds issued in
Zone A; land and buildings and/or loans secured by registered mortgages thereon; loans secured on the company’s own life insurance policies up to their surrender
value).
3) Shares and other certificates of capital participations listed on the public stock exchange in Zone A.
4) Land and buildings not considered “low-risk” (see 2).
B. Previously a minimum of 60% had to be invested in “low-risk assets”; this has now been replaced by a maximum of 50% in so-called “high-risk assets” as defined in the
table.
Annex 2
Theoretically, pension funds invested through an insurance company are subject to the Third Life Directive. However, these restrictions apply to the total business of the
Insurance Companies and they are able to organise their affairs in such a way that in practice the restrictions do not apply to the pension fund portfolios.
Annex 3
In the current Luxembourg pensions law, there are no quantitative investment restrictions, but a “Prudent Person” approach is requested. The investment policy has to be
accepted and is supervised by the CSF (Commission de Surveillance du Secteur Financier).
Annex 4
Since April 2000 the new Swiss pensions law does no longer incorporate any quantitative investment restrictions, but a “Prudent Person” approach is requested.
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
SOUTH & CENTRAL
AMERICA
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Country Characteristics same
Total total
issuer
Argentina Equities 70
Public bonds 80
Corporate bonds 40
Real estate certificates 40
Mutual funds 30
Options and futures 10
Fixed term deposits in financial institutions 30
8
Securities issued by foreign entities 20
Chile Public bonds 50
Term deposits and securites issued or guaranteed by financial
50
institutions
9
Bonds issued by public or private companies 45
real estate certificates 50
Equities 40
Mutual funds 5 25
10
Securities issued by foreign entities 16
Colombia Public bonds and other securities issued by public entities 80
Term deposits and securites issued or guaranteed by financial
11 42
institutions
Real estate certificates 40
Corporate Bonds 30
Mutual funds 5
12
International investments 10
13
Equity 30
8
10% in securities issued by foreign states or international public bodies and 10% in securities issued by foreign companies.
9
Of which, up to 10% may be invested in convertible bonds issued by public or private companies
10
The maximum permitted in international equity is 10%, while investments in international bonds may reach 16%.
11
10% in securities issued by the Investments Guaranteed Fund + 30% in fixed income securities issued or guaranteed by financial institutions + 2% in oversight deposits.
12
Includes bonds issued or guarantedd by foreign goverments, central banks and comercial or investment banks, mutual funds that invest in bonds and index funds.
13
Equity with a high or medium liquidity. The maximum permitted in not very liquid or illiquid equity is 5%.
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Characteristics
Country Same
Total Total
issuer
El Salvador Securities issued by public entitites 100
Corporate bonds issued by domestic companies 40
units of domestic investment funds 20
Equity and convertible bonds issued by domestic companies 20
Securities backed by real property guarante 40
Certificates of deposits and securities issued by domestic financial
40
institutions
Securities issued by public entities 40
Deposits and bonds issued or guaranteed by financial institutions. 10 55
Mortage certificates or securities 40
Corporate bonds 40
Perú
Equity 15 35
Investment funds 12 12
International investments 7,5
Operations of hedging of financial risks. 5
Uruguay National Government Bonds 65
Term deposits 30
Securities issued by public and private companies 25
Real Estate certificates 30
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
OTHERS OECD
COUNTRIES
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002
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INVESTMENT RESTRICTIONS APPLICABLE TO PENSION FUNDS
Minimum % Maximum %
Characteristics Same
Country Total Total
issuer
14
Canada Foreign investments 30
Securities issued by a non Government issuer 10
Voting securities 30
PRUDENT MAN RULE
15
USA PRUDENT MAN RULE 30
SPECIFIC INVESTMENT RULES for:
Employee Stock Ownership Plan (ESOP):
17
- Stock of the sponsoring company 50
16
DC plan (including 401K):
DB plan:
- Stock of the sponsoring company 10
- Real Estate 10
18
Australia Stock of the sponsoring company 5
No restrictions regarding the investment in different asset classes
14
30% of book value of portfolio.
15
30% of book value of portfolio.
16
These plans may allow the participants to invest directly their account balances. In this case, the plan must provide at least three investment options that represents different levels of risk.
17
Except, for participants who are age 50 or older and for those who have more than 15 years of service.
18
It does not exist rules which direct or restrict investment into asset classes.
6349d428-b8ea-4907-983f-9591b53ae7fd.doc Worls Pension Association, april 2002