Compulsory private pension funds will be almost identical because of the limitations imposed by legislation, for which reasons the success of sales will depend on advertising campaigns and distribution channels, says Adrian Allott, deputy general manager with Aviva.
Advertising investments and the development of distribution channels will make the difference in terms of the success managers of compulsory private pensions (pillar II) will enjoy, says Allott. At present, Aviva is setting up its own compulsory pension fund, to have Abbott as a general manager.
"Compulsory pension funds will be highly homogeneous products due to requirements related to yield and fees, capped at a quite low level," stated Allott. By law, compulsory pension funds will have to conform to a minimum yield threshold, whose level will be set by the Private Pensions Commission (CSSPP).
Due to the minimum yield requirements, all managers of compulsory pension funds are highly likely to choose quasi-identical investment strategies, says Aviva representative.
By comparison, on the segment of optional private pensions (pillar III), funds have more precise requirements-namely the minimum yield imposed by law must exceed half the pension market average or not be four percentage points at the highest below this market average. Unlike in the case of optional pensions, the maximum fees that can be levied by compulsory pension managers are two times smaller, which considerably restricts managers' freedom of action," considers Allott.
"Competition is always beneficial to customers, but in the case of compulsory pensions competition will be limited to the maximum by law. It would have been better for products to be as different as possible, to give customers a real choice," commented Allott. Speaking about Aviva's strategy on the segment of compulsory pensions, Allott says init
