Netherlands: Change on the horizon
01 Mar 2010
It has been the poster boy of the international pensions world, but the Netherlands is now
reflecting on recent failings following the publication of the Frijns and Goudswaard reports, writes Liam Kennedy, as the prospect of a real cover ratio looms on the horizon
Even central bankers can’t see into the future. “In an ideal world I take decisions today as a supervisor based on my knowledge about tomorrow. But things don’t work like that.” So said Nout Wellink, the governor of De Nederlandsche Bank (DNB), at the beginning of February before a parliamentary committee of enquiry into the financial system, as reported by the Dutch daily NRC Handelsblad.
Governance, whether of the financial system or of individual pension funds, is the topic du jour in the Netherlands right now. While Wellink may have received his fair share of brickbats for perceived failings in the risk management of the economy as a whole, pension fund managers have also come in for a fair share of criticism for missing years of indexation, plummeting coverage ratios and investments in complex strategies. Wellink’s comments were even pithier because while the governor confessed his human frailty, the DNB as pension fund supervisor, is also cracking down on the frailties of pension funds and their board members.
This crack-down is part of a concerted focus on pensions. Post crisis, The Hague’s social affairs and labour minister, Piet Hein Donner, appointed two committees – one chaired by Jean Frijns, former head of ABP Investments, to assess the investment policies and risk management of pension funds in the Netherlands, and another chaired by Kees Goudswaard, professor of applied economics and social security at Leiden University, to assess the social contract nature of pension fund agreements and the pension system as a whole. Both reports were published in January.
Both reports have profound implications for pension investment; Frijns for example concludes that pension funds have structurally paid too little attention to risk management and the execution of investment policy, and that the FTK pension solvency regime pays too little attention to the real nature of pension promises, even if such promises are not explicit in the case of most pension funds.
Author: Liam Kennedy
