SPOA, the €1.2bn pension fund for public pharmacists in the Netherlands, lost 0.7% on its investments in 2013 due to what it described as its defensive investment mix. As a consequence, its return fell 5.4 percentage points short of Dutch pension funds’ average return, as estimated by supervisor De Nederlandsche Bank (DNB).It said it lost 8% on its fixed income holdings – currently 61% – due to rising interest rates last year.A return of almost 16.5% on the scheme’s equity portfolio could not offset the negative return on fixed income, it said. At the end of 2012, SPOA had a 23% stake in equity. Its holdings in property and alternatives were 7% and 6%, respectively, at the time.In a clarification on SPOA’s website, the board said it could not change its investment policy, arguing that the DNB would shoot down a more risky investment policy given the scheme’s financial position.At February-end, SPOA’s coverage ratio was 107.9%, including a required rights discount of 4.6% for this year.In 2012 and13, the pharmacists scheme had already to cut pension rights by 7% and 6.8% respectively.SPOA chairman Mark Hagenzieker told IPE that the pension fund does not want to drastically change its investment policy either.“We have always invested conservatively,” he said, adding that a recent asset-liability management study has made clear that the current investment mix is the best for the pension fund. However, Hagenzieker declined to provide details about the current portfolio.SPOA has always prioritised pensions’ accrual to accruing financial buffers. As a consequence, the scheme suffered badly during the financial crisis, with its coverage reaching an absolute low of 84.1% in 2011.The board of the pharmacists scheme further made clear that it is looking into the options of cost reduction. It said that the pension contribution of its participants is based on a cost level of 0.5%, but that it had found that the real costs were 1.5% during 2013.SPOA has approximately 2,745 active participants, 960 deferred members and 1,130 pensioners.
Herd behaviour of UK schemes ‘amplifying asset price’ – BoE
“This is unlikely to be optimal,” the report adds, “as it is asymmetric across pension funds, and relaxation of regulation in periods of stress does not follow a build-up of resilience as asset values rise in more benign circumstances, nor can it be relied upon by pension funds when determining asset allocation.”The report also expresses concerns that the DB sector is prone to engaging in reputational herding – “that is, they are driven by fear of underperformance relative to their peer group to invest in the same assets at the same time as their peers”.It notes that if such behaviour occurs at the same time as wider market trends, it could result in further procyclicality “potentially amplifying asset price or economic cycles”.The bank was also critical about the number of underfunded DB schemes de-risking more slowly than their better funded counterparts.“While this may have been understandable from the perspective of individual funds,” the report says, “it may not be optimal from a systemic perspective, as it implies that stronger pension funds were not taking advantage of their ability to purchase risk.”It concludes that the absence of activity from the better funded schemes could have otherwise had a stabilising role, acting as a countercyclical buffer during times of stress.Andrew Haldane, executive director of financial stability at the BoE, previously opined that while the bank did not believe the ‘too big to fail’ rule applied to asset managers, it nonetheless thought there was genuine risk stemming from a large asset manager becoming distressed.,WebsitesWe are not responsible for the content of external sitesLink to report by Bank of England The UK’s central bank has warned that the herd behaviour of the UK defined benefit (DB) industry risks “amplifying” prevailing economic trends.A Bank of England (BoE) paper on procyclical and structural trends in the insurance and pension market said that while the medium-term asset allocation of DB funds seems largely “dictated by longer-term structural shifts”, as opposed to cyclical concerns, larger DB funds seem to have implemented longer-term, post-crisis asset allocation changes that are procyclical.“Although consistent with longer-term structural shifts in asset allocation, the continued selling of UK equities during the financial crisis by corporate DB pension funds may have further added to instability in the context of wider market moves at that time and, if taken in isolation, could be viewed as procyclical,” the report says.The bank also noted that a number of other countries had relaxed pension regulation during the crisis, which it accepted could have “muted” the sector’s procyclical behaviour.
DB sponsors facing challenges in low-interest-rate environment – KPMG
A report published by KPMG shows that 2014 was a volatile year for pension schemes, with long-dated interest rates falling sharply and feeding through into an increase in the value of pension liabilities.The KPMG study looked at 270 companies reporting variously under International Financial Reporting Standards, UK GAAP and US GAAP.The report’s author, Katy Edwards, told IPE: “Persistent low interest rates have meant corporate bond yields were at historic lows at year-end.“This was generally bad news for pension schemes – despite equity market rallies and strong fixed income asset performance over the year.” Edwards added that this low real-yield environment served to pushed up year-end pension scheme liabilities by as much as a 10% in Q4 2014 alone.“Pension disclosures are likely to continue to attract scrutiny from shareholders and analysts as the pensions exposure increases relative to the overall balance sheet,” she warned.Naz Peralta, a director in KPMG’s London office, added: “Accounting deficits among FTSE 100 companies have generally deteriorated, but many schemes have hedging strategies in place on the asset side.”This means, allowing for deficit contributions, many corporates are showing only modestly worse positions, he said. Around the major pensions-accounting assumptions, the KPMG number-crunchers reported a continuation of a trend evident last year, with companies clustering ever more closely around the median in many cases.For example, some 76% of companies used an inflation assumption within 0.1% of the median, while 76% of companies were within 0.1% of the median discount rate assumption.In terms of the hard numbers, the median discount rate assumption has fallen from 4.5% last year to 3.6% this year.KPMG said the dramatic reduction in
bond yields led many sponsors to review their discount rate assumption with a view to mitigating some of the impact of falling yields on the balance sheet.Changes to IAS 19 in place since 2013 mean companies should provide a narrative disclosure around key assumptions such as the discount rate.In line with global economic picture, median RPI assumptions have also fallen from 3.4% to 3.1%.Mortality assumptions have remained broadly unchanged over 2013, with a current pensioner aged 65 expected to survive a further 22.6 years on average.A future pensioner currently aged 45 is expected to live for a further 24.2 years from the age of 65.The current low-inflation environment has also put downward pressure on both pension and salary increases.The most common pension increase reported by the KPMG study is inflation capped at 5% per annum, while the median salary increase remains at 0.50% above RPI inflation.Looking ahead, Peralta said the challenging economic and investment landscape added up to tough negotiations with trustees for those schemes about to embark on a valuation review.“I would say the primary concern for public companies against this backdrop of low yields is not so much the accounting but rather the negotiation of triennial funding arrangements with trustees,” he said. “Although assets and liabilities might be tracking each other, the scheme may have grown relative to the size of the balance sheet, or the sponsor may be in a sector that is under pressure in the current economic environment.“This may put pressure on the sponsor covenant and cash contributions, though sponsors will increasingly look to non-cash solutions such as additional security to provide comfort to trustees.”Looking forward, the KPMG experts believe the IAS 19 guidance on the asset ceiling and surplus recognition, IFRIC 14, will continue to weigh on preparers working under international standards.Peralta said: “To the extent that corporates have IFRIC 14 restrictions, which may be 10-20% of reporters, tougher funding negotiations may lead to greater balance sheet restrictions.“If a sponsor commits more cash on a present-value basis to the trustees than they did during their last funding round, it might be that they have to provide for this on the balance sheet because of IFRIC 14.”He added that preparers should be mindful of possible changes to IFRIC 14, with the IASB poised to issue an exposure draft detailing changes to the guidance.Those changes address a defined benefit plan sponsor’s ability to access a refund of contributions where the plan structure features an independent trustee body.“If the IFRIC 14 changes come in, inevitably this issue will impact some companies adversely,” Peralta said.“Our recommendation is for scheme sponsors to think about the potential impact.”In addition, KPMG also note that DB sponsors in the UK could also be affected by the way so-called pensions freedoms could feed through into their liability assessment.Finally, sponsors in the EU could also be affected by the recent European court PPG decision dealing with an employer’s entitlement to deduct VAT in respect of pension fund management services.
UK asset manager association set to lose members
A source familiar with the departing managers’ concerns said there had been dissatisfaction within the industry over the principles – evident by the low level of backing among members – but added that the decision to let membership lapse was not down to any one issue.Reports also alleged that Aberdeen Asset Management and Invesco Perpetual were considering their continued membership.Invesco declined to comment, while Aberdeen could not be reached for comment at the time of writing. Daniel Godfrey, the association’s chief executive, said it would be “incredibly disappointing” if any asset managers were to leave the association.He said he would do everything he could to ensure managers’ continued membership.“Our very pro-active strategy to help a great investment management industry make investment even better can be uncomfortable at times,” he said.“But it is not only the right thing to do given the responsibility of managing other people’s money as their agents, it is essential in the post-global-financial-crisis world if we are to maintain the right to have influence over our future regulatory and legislative environment.” The UK’s asset management association is braced for the departure of two of its members, M&G and Schroders, after dissatisfaction over the work undertaken by the Investment Association (IA).The managers declined to comment on reports they would be leaving the association, but IPE understands that both – with combined assets of £565bn (€721bn) – would be letting their membership lapse at the end of this year.The association recently urged its members to increase transparency, publishing a list of 10 principles that only received support from a minority of members.Only 25 of the association’s 204 members, representing £1.8trn of its £5.5trn in assets, backed the principles, which said clients’ interests should be put ahead of those of the asset manager and called for more transparency on fees.
Klijnsma to consult stakeholders on pension funds’ ‘dire’ position
Jetta Klijnsma, state secretary at the Social Affairs Ministry in the Netherlands, is to consult with the pensions sector, social partners, regulator DNB and the Bureau for Economic Policy Analysis (CPB) about Dutch schemes’ precarious financial position.In a letter to Parliament, she said she and the regulator had grasped the “difficulties” pension funds were facing.She did not, however, provide any possible solutions to these problems.Klijnsma had previously suggested the government would consider raising the AOW state pension if pension funds were forced to discount pension rights. Minister of Finance Jeroen Dijsselbloem has also recently hinted at moves to “repair” purchasing-power imbalances. Funding at Dutch schemes – chiefly as a consequence of low interest rates, the criterion for discounting liabilities – has fallen to 95% on average.The minimum required by the government is 105%.If, by the end of this year, funding falls to 90% or lower, pension funds must start cutting pension rights.At Klijnsma’s request, the regulator is preparing a report on current coverage ratios, as well as the recovery plans underfunded schemes must submit by 1 April.Last week, companies and workers called on the Cabinet to stop the downward spiral in the pensions sector, the first time employers have publicly asked the government for action.In January, unions argued that the regulator should reconsider its decision last July to lower the ultimate forward rate – part of the discount mechanism for liabilities – from 4.2% to 3.3%.Hedda Renooij, pensions policy secretary at employer organisation VNO-NCW, said: “What matters to us, given the low interest rates and funding ratios, is that we can find an accessible road to a new pensions system less susceptible to interest rates.”She added that the VNO-NCW had not proposed changes to the financial assessment framework (nFTK) or the current pensions system.Meanwhile, the Dutch Pensions Federation has downplayed the loss of purchasing power for pension funds’ participants and pensioners.Its spokesman said: “Because the nFTK allows for smoothing out discounts over a 10-year period, purchasing power would probably drop no more than decimal places.”The real problem, he said, is “the lack of light at the end of the tunnel”.“If interest rates remain at their current levels, many pension funds will find themselves in a worrying position.”The Pensions Federation believes politicians must take the next step, “as pension funds are unable to solve the current problems”.
Resaver to receive first payments in March [amended]
In addition, the pension fund has been awarded a €400,000 grant by the EU to cover initial and running costs “in the first year of its operations”. The EU has also earmarked more money to support the pension scheme in its Horizon2020 budget.“We expect that this generous support will be an open invitation to employers of researchers – public and private research institutions and universities, SMEs, and research and technical development companies – to join the pension fund in its initial phase,” said Gabriella Kemeny, chair of Resaver Consortium and Pension Funds.The consortium behind the Resaver pension fund has already been joined by over 20 organisations representing various institutions, with some expected to start contributions later this year.The pension fund is advised by Aon Hewitt, BlackRock won the initial investment mandate, and Previnet is handling the administration including a multi-language user portal.Paul Jankowitsch, Resaver membership and promotion chair, told IPE he was convinced the pension plan would “improve the financial perspective for researchers and foster mobility within the European Economic Area”. This story previously stated that Italy’s Elettra Sincrotrone Trieste and Istituto Italiano di Tecnologia would be among the first contributors. They have not yet confirmed contributions to Resaver. From March the first member organisations will transfer contributions to the Resaver cross-border pension plan.The first institution to make contributions will be one of the founding members: the Central European University, based in Hungary.Resaver confirmed the pension plan for academic researchers has also achieved “local regulatory approval to operate [in] Hungary and Italy”.The cross-border plan was set up as a Belgian OFP (Organisme de Financement de Pensions) last year and received the approval from the Belgian supervisory authority FSMA a few weeks ago.
France roundup: FRR private equity mandates; FRPS rules published
FRR has previously indicated that it would allocate around €900m to private equity, and has launched separate tenders for “innovation” and growth capital mandates, for up to €200m and €500m, respectively. It has already awarded €600m of private debt mandates.Pension fund regulatory framework coming together Regulations governing a new type of occupational pension funding vehicle in France have been published.The new entities – Fonds de retraite professionelle supplémentaire (FRPS) – were provided for by legislation known as Sapin II in late 2016. They will qualify as Institutions for Occupational Retirement Provision (IORPs) under EU law and are due to be subject to the revised IORP Directive when this is transposed in France.Regulations were released on 19 July that set out rules for how the new entities were to be established and authorised, and how their governance, and financial and prudential management should be organised.This comes after the French government in early April published an “ordinance” that set out the rules formalising the creation of the FRPS. The law ratifying this is going through parliament.Another implementing regulation is awaited, which will set out how to carry out stress tests assessing coverage of solvency requirements over a 10-year period.The FRPS will be subject to a bespoke regulatory regime based on quantitative measures similar to those of Solvency I regulation for insurers, with the addition of the aforementioned stress test, and governance measures similar to those provided for by Solvency II.The intention is for insurance companies and mutual and provident institutions to be able to move certain types of occupational pension business out from under Solvency II regulation and into a regime that better reflects the long-term nature of pension provision. This involves being freed from Solvency II capital requirements, which are seen as penalising certain asset classes, such as equities. A recent Financial Stability Board “peer review” of France said the creation of French-style pension funds was intended to redirect €10bn-€20bn into financing the domestic economy.Natixis AM to appeal overcharging fine Natixis Asset Management “strongly disputes” the decision of the enforcement committee of the French financial markets regulator concerning its “formula-based” funds activity, it has said.The Autorité des marches financiers (AMF) last week announced that it had issued a warning to Natixis and fined it €35m because it considered the asset manager had breached its professional obligations in the management of some of its formula funds between 2012-2015.Natixis said it intends to appeal the decision. It noted that the enforcement committee did not follow the AMF board’s recommendation in making its decision.It said it believes that the decision is “unwarranted and disproportionate and firmly denies failing to fulil its professional obligations”. The AMF said its enforcement committee identified four regulatory breaches in relation to the redemption fees for some of the funds it inspected and in relation to the structuring margin of some funds. The €35m fine is the largest the French regulator has imposed. Natixis Asset Management said investors in its formula funds “were in no way adversely affected and were fully informed in accordance with applicable regulations”. Formula funds are a type of structured product that offer a guarantee of invested capital based on a pre-determined formula. France’s €36bn pension reserve fund has awarded three private equity fund-of-fund mandates for a total of between €100m and €400m. The mandates have gone to Ardian France, LGT Capital Partners, and Swen Capital Partners. A spokesperson for the Fonds de réserve pour les retraites (FRR) said the distribution of the capital between the three managers could not be specified at this stage.The managers will be responsible for creating and running portfolios of funds allocating at least 80% of their assets to the equity or quasi-equity of unlisted French companies.The mandates are for 12 years, and form part of the implementation of around €2.1bn of new allocations to unlisted French assets.
People moves: Australian pensions giant sets up European office [updated]
AustralianSuper, Euronext, FRC, ASR, Robeco, PIMCO, Smart Pension, MJ Hudson Allenbridge, JPMAM, NNIP, Triodos IM, KPMG, Investec, Azimut, BNP Paribas, Kempen, MontaeAustralianSuper – The AUD120bn (€75.3bn) Australian pension fund has strengthened its European presence, appointing Damien Moloney to head a newly-created position of head of investments for Europe. He joins from Frontier Advisors where he has been CEO since 2011. He will lead the pension fund’s investment programme in the UK from its London office and oversee the pension fund’s offshore investments platform.AustralianSuper CIO Mark Delaney said that with nearly half of AustralianSuper’s member assets now invested overseas “it is very important that we have a local presence in markets where we are investing”.Moloney’s recruitment is also part of the fund’s strategy to bring management of its investments in-house and save an estimated AUD100m a year in costs. It is on target to manage 50% of member assets internally within five years – it currently runs roughly 30% of its portfolio in-house. AustralianSuper is the largest industry superannuation fund in Australia. Euronext – The multinational stock exchange firm Euronext has elected Dick Sluimers as chairman of its supervisory board. He succeeds Rijnhard van Tets, who has chaired the board for the past 11 years and will leave on 15 May. Sluimers, who retired in 2016 as chief executive of the €456bn asset manager APG, was already vice chair of the supervisory board.Financial Reporting Council – The UK audit and accounting watchdog has appointed Julia Unwin and Jenny Watson to its board with effect from 1 April. Unwin is a former chief executive of the Joseph Rowntree Foundation and currently chairs an independent inquiry into the “Future of Civil Society in England”. Watson is chair of the independent complaints council at Portman Group, the oversight body for UK drinks producers, and is also a non-executive director of the Financial Ombudsman Service. ASR – Insurer ASR Netherlands plans to nominate Sonja Barendregt and Stephanie Hottenhuis as members of its supervisory board (RvC). Hottenhuis has been a member of the executive board of engineering firm Arcadis since 2012. Prior to this, she was responsible for the European activities of the company. Since 2013, Hottenhuis has been an RvC member at power grid operator TenneT. Robeco – Separately, Sonja Barendregt has also been appointed to the supervisory board of €161bn asset manager Robeco, effective 1 April. She succeeds Jan Nooitgedagt, who is to step down after four years. Barendregt started her career at one of the legal predecessors of PwC and was a partner there between 1998 and 2017, chairing its international pensions group.PIMCO – The major fixed income investment manager has hired Gavin Power as executive vice president and head of international affairs and sustainable development. The hire is part of the firm’s efforts to grow its environmental, social and governance platform, which it launched last year. Before joining PIMCO, Power was the deputy executive director of the United Nations Global Compact, the platform used to advance sustainability efforts and responsible investment in more than 160 countries. He was also a co-founder of the Principles for Responsible Investment (PRI) and served on the PRI’s primary governance body from 2006 to 2018. Power will be based in California and report to Libby Cantrill, managing director and head of public policy. Smart Pension – The UK defined contribution pension provider has appointed Martin Freeman to lead its technology product development division. He joins from Capita where he was a senior consultant responsible for online engagement. He has also worked at JLT. His appointment follows other recent senior hires for the company, including Jamie Fiveash from The People’s Pension and Paul Budgen from NEST.MJ Hudson Allenbridge – The UK investment adviser has appointed Cameron McMullen as a director. McMullen was previously at rival investment consultancy JLT where he led the promotion of the company’s services to the private and public sector, with a focus on local authority pension funds. Before that he was at Standard Life. JP Morgan Asset Management – Claude Kurzo has been appointed country head for Switzerland. He has worked at JPMAM since 2012, having previously worked at consultancy McKinsey & Company. He moves from New York to Zurich to succeed the departing Patrick Beuret.NN Investment Partners – The €246bn asset manager has named Lewis Jones as lead portfolio manager for its local currency emerging market debt (EMD) strategies. Based in New York, he becomes reponsible for daily management of all EMD local currency portfolios and is to report to Marcelo Assalin, the company’s head of EMD.Jones started as senior portfolio manager EMD local currency in New York in 2016 and has 13 years of EMD experience, largely gained at BNP Paribas IP and Fisher Francis Trees & Watts in Boston. He has also worked at State Street Global Advisors in London and at Aviva in Boston. NN IP’s EMD team comprises of 19 investment professionals and has approximately $10bn under management.Triodos IM – Kor Bosscher has been appointed managing director for risk and finance as well as a member of the executive board of the €3.5bn Triodos Investment Management. Until recently, he was chief executive and chief financial and risk officer at i-PensionSolutions, the low-cost DC vehicle (PPI), which has recently been taken over by ABN Amro PPI. Between 2008 and 2016, Bosscher was financial director at the €123bn asset manager and pensions provider MN.KPMG – Dave Lyons has joined the consultancy as head of investment advice to UK public sector pension funds. Lyons was previously at Aon Hewitt, where he was head of public sector investment consulting. Investec Asset Management – Alastair Leather has been hired as UK institutional sales director, reporting to Edward Evers, head of global consultants. Leather previously at Goldman Sachs Asset Management, where he was most recently vice president of institutional sales, and a member of the strategic client group responsible for developing relationships with UK pension schemes. He was at Goldman Sachs for 10 years. Azimut – The Italian fund manager has hired Nicolò Bocchin as head of fixed income. He joins from Aletti Gestielle SGR where he was portfolio manager and responsible for the credit desk. Azimut is Italy’s biggest independent fund manager, running €51bn.BNP Paribas AM – Michiel Koudijs has started as business development manager at BNP Paribas AM, and is to become a member of the institutional sales team for the Netherlands. He joins from KAS Bank where he worked for 12 years, responsible for sales and client management for pension funds. He was also a member of the accountability body of his employer’s pension fund.Kempen – Kempen Capital Management has appointed Mark Vreeswijk as client manager, tasked with extending the company’s relationships with pension funds and insurers. During the past three years Vreeswijk worked at Goldman Sachs in London, liaising with Dutch institutional investors. Prior to this, he sold fixed income products to Dutch pension funds and insurers at Barclays Capital.Montae – Menko Nieland has joined Dutch pensions adviser Montae as consultant for balance and risk management. Nieland came from pensions supervisor De Nederlandsche Bank where he was supervisor on the on-site team for pension funds and insurers.
Dutch Pensions Federation rings alarm bells over looming disaster [updated]
Credit: Mark Prins Dutch social affairs minister Wouter KoolmeesThe new financial assessment framework (nFTK), introduced in 2015, required pension funds to reduce pension rights if their coverage ratio had been below 104.3% for a consecutive period of five years.The industry organisation said it now expected that 2m pension fund participants and pensioners would be hit by cuts next year.Cuts of up to 8%It added that cuts of up to 8% would be possible, despite the reduction of the minimum required funding level.Although the Pensions Federation did not dispute the reduced return assumptions, it noted that the combination with falling interest rates and a lower discount rate had created a “very worrying outlook”.The worsening financial position of schemes would have significant consequences for contribution levels and annual accrual rates for pensions, it added.The organisation estimated that contributions could have to rise by between 10% and 30% as a direct effect of the new parameters. It added that the trade war between the US and China, “rumours about new monetary measures” by the European Central Bank as well as Brexit developments had caused all warning signs to become “deep red”.Within a short time span “extraordinary things” had happened, the trade body said, such as a negative German government bond yield curve for all durations, and residential mortgages issued against negative interest rates in Denmark.Government bond yield curvesChart MakerThe Pensions Federation said it would be sensible for the cabinet set the minimum required funding permanently at 100%, rather than 104.3%, ahead of the introduction of a new pensions contract.In June this year, following an pensions agreement struck between the cabinet and the social partners, the government said it would temporarily reduce the minimum required funding level for Dutch schemes to 100% in order to reduce the scale of cuts of pension rights and benefits. Volatile equity and bond markets have worsened the financial position of Dutch pension fundsIf contributions could not be raised, annual accruals would have to be reduced to between 1.3% and 1.5% for defined contribution plans, rather than the 1.875% deemed necessary for an adequate pension, it said.According to the federation, pension funds’ financial position is expected to deteriorate further in 2021, when the new lower discount rate for liabilities comes into effect. Pension funds with a young demographic in particular could lose up to 10 percentage points of their funding.In August, pension funds’ coverage ratio fell to 98% on average, according to Aon Hewitt, and to 96%, according to Mercer.ABP and PFZWDuring a debate in parliament last Thursday, Koolmees said it wouldn’t be possible to entirely prevent rights and benefits cuts.He said he would look into the cuts prescribed by the nFTK for pension funds that were unlikely to be able to restore their funding level to at least 120% within 10 years.Under current circumstances, this prospect applied to the civil service scheme ABP and healthcare sector pension fund PFZW, the two biggest funds in the Netherlands. At the end of July, their funding levels stood at 93.9% and 94.8%, respectively.Koolmees rejected raising the discount rate as a way to prevent cuts, while acknowledging that a discount rate would not be relevant in a new pensions system with individual pensions accrual.A large majority in parliament demanded an investigation into the sustainability of the current capital-funded pensions system in the context of persistently low interest rates.Politicians also demanded independent advice – for example from the Netherlands Bureau for Economic Policy Analysis and supervisor De Nederlandsche Bank – about financing pensions in a zero interest rate environment, and what this would mean for supervision.This article was updated on 9 September 2019 to clarify the wording in the third paragraph and the second paragraph under the ‘ABP and PFZW’ heading.
Dutch social affairs minister Wouter Koolmees is to assess potential measures to limit cuts to pension rights and benefits in the Netherlands, after the Pensions Federation became the latest organisation to ring the alarm about a looming disaster in the sector.In a position paper, the pensions industry organisation called for urgent consultations between the minister and the sector in order to prevent the pensions system being severely damaged by collapsing interest rates, and to prevent public confidence in the system being undermined.The Pensions Federation warned that contributions would have to rise significantly to keep pensions at an adequate level. Without such an increase, annual accrual rates would have to be reduced.The organisation said that prospects had worsened following the cabinet’s recent decision to reduce the prescribed assumptions for future returns, to be used in pension fund recovery plans as of 2020, and to lower the discount rate for liabilities from 2021.
Dutch transport pension fund to adopt one-tier board
The fact that SPF wanted to stick to its board setup was a reason for failed merger talks in 2017. At the time, SPOV was worried about the expertise of the equally represented executive trustees.A spokesman for SPF Beheer, the provider and asset manager for the merged pension fund, explained that the new board model increased Rail&OV’s decisiveness, while keeping the concept of equal representation.On the new executive board, Sabijn Timmers will handle portfolio finance, risk and IT. Currently she is director of risk management at Triodos Bank. Bart Oldenkamp, head of investment solutions at asset manager Robeco, has been tasked with asset management.Peter-Paul Witte – SPOV’s current chair – is to become responsible for the temporary portfolio of transition.All envisaged non-executive members originate from SPF and SPOV’s boards, with Paula Verhoef, Peggy Wilson and Frans van Wanrooij representing workers.Huub van den Dungen and Rob Elberse are to represent pensioners. Mathilde Reintjes, Ronald Klein Wassink, Fred Kagie and Hans Fleer are to be appointed on behalf of the employers, which include the Dutch railways (NS), ProRail and the association of public transport companies (VOV).There is still one vacancy to be filled.The new €23.3bn pension fund is to start as of 1 April and will operate under chief executive officer Walter Mutsaers.He is currently CEO at MPD, the pensions provider and asset manager for the €7.2bn pension fund PNO Media, and a former director at MN, the pensions provider and asset manager for the large metal schemes PMT and PME. Rail&OV, the new Dutch scheme of merged railways pension fund SPF and public transport scheme SPOV, is to switch to a one-tier board.Currently, SPOV has a board model of equal representation, whereas SPF has a “mixed one-tier board”, of equally represented trustees combined with external supervisory members.The executive board of the new scheme will be made up of four full-time members. It will be independently chaired by Gerard Groten, the current chair of SPF, who is also to become one of the 11 members of the non-executive board.Dutch pension funds are increasingly switching from equally represented boards to a one-tier structure as it is considered more effective, efficient and transparent than the traditional paritary ones. A one-tier board, for example, doesn’t need a separate supervisory body.