NETHERLANDS – A proposal by Dutch chemical group Akzo Nobel to restructure of its pension fund has been called a “benchmark case” for the Dutch corporate pension fund market.
“This is a benchmark case for Dutch corporate pension funds,” said Amin Mansour, managing director of Dutch product development company Fund Partners.
Akzo has said it would continue to pay pension premiums to its pension fund, but staff would bear the risks of the fund's investments by making up the shortage if the fund's coverage ratio drops below 100%.
Mansour said Akzo appears to be proposing a move to a defined contribution model from defined benefit. He said the company already has a DC scheme for managers operated by Rabobank’s Robeco arm.
“In the future more companies will be moving in this direction,” Mansour said. “We think that DC is going to conquer the Dutch market.”
Akzo last month reported its first-quarter net profit had dropped by 30% - in part due to one-off pension charges. "Akzo Nobel aims for a pension system that links a minimal risk for participants to freedom of action for the company. That is the only way for the company to continue having results that everybody wants," it said.
The restructuring of the pension fund mirrors a wider corporate revamp at Akzo.
“It’s a major shift,” says Fund Partners’ Mansour. “Akzo is the first large Dutch corporate to restructure its pension fund.” Other funds have tinkered with freezing benefits and indexation.
But, Mansour says, Akzo’s proposal will solve the problem presented by the new accounting standard IAS 2005. Under this companies will have to include on their balance sheet the company’s net pension liability, or asset, at fair value.