Iceland’s pension funds are up in arms about the government’s plan to change the law to enable it to liquidate the Housing Finance Fund (HFF) without fully compensating its bond investors – the largest of whom are the pension funds.
The Icelandic Pension Fund Association (Landssamtök lífeyrissjóða, LL) said: “The government’s consultation portal has announced the government’s plans to terminate HFF funds and thus not comply with the agreements made, with the result that losses will be passed on to the owners of housing bonds.”
The HFF (ÍL-sjóður) is an independent government institution granting mortgage loans to individuals, municipalities, companies and organisations to finance housing purchase and construction work.
The government said its proposed legislation is to deal with the bankruptcy of the HFF, which was set up in three years ago to take over from the Housing Loan Fund.
The draft law involves repaying HFF bondholders early but not compensating them for future interest they were entitled to under the terms of the agreement.
The pension funds’ lobby group said on Friday that the largest owner of the bonds was the national pension funds.
LL described the government’s plans as illegal, and said a number of legal opinions had concluded that the state would be liable for damages as a result.
“It is important that the state abandons these plans, accepts its responsibilities and starts negotiations with the owners of the bonds on the right grounds, just as the pension funds have shown their will to do,” the association said.
“We should be able to trust the state as a negotiator, but the reputation of the Icelandic state is at stake here,” it said.
Several of the pension funds individually put out similar statements on their websites on Friday, the date the government’s consultation on the HFF liquidation draft legislation ended.
In a typical statement, Festa Pension Fund said the plans by Bjarni Benediktsson, the Minister of Finance and Economic Affairs, for legislation regarding the liquidation and settlement of the ÍL fund were based on an insufficient analysis of legal and financial aspects and included an attempt to circumvent the state’s financial obligations.
In all, 20 pension funds have submitted comments in the government’s consultation as part of a coordinated response.
IPE has asked the Iceland Finance Ministry for a response to the pension funds’ comments.
Read the digital edition of IPE’s latest magazine
No comments yet