AVH, the €1.8bn Dutch pension fund for the agricultural and food trade, has – at the last minute – decided to refrain from joining the multi-sector scheme PGB.
On their websites, both schemes explained the merger would have come at the expense of a 15% rights discount at AVH, because of differing coverage ratios.
In September, AVH announced it planned to transfer its pension assets to the €29bn PGB because of its poor financial position, as well as increasingly strict legal requirements.
At the time, the funding difference between the two pension funds was 10%.
Arjan Hess, AVH’s chair, attributed the spiked coverage gap to the increase in interest rates as well as improved equity markets during the past months.
These developments had benefited PGB more than AVH, he said.
Statistics provided by supervisor De Nederlandsche Bank (DNB) showed that PGB had an interest rate hedge of 27%, against 48% at AVH.
Securities holdings at both PGB and AVH were 61% and 36%, respectively, according to DNB.
AVH’s board said it would reconsider its future, and added that rights cuts at the end of 2020 were still “very likely”.
At the end of November, the scheme’s coverage ratio stood at 92.1%.
A complicating factor is that Robeco had announced it would cease its services as a fiduciary manager for the pension fund.
However, AVH’s chair said Robeco indicated it could extend its services for a while longer.
Additionally, AGH, AVH’s small pensions provider, has financial and organisational challenges and is currently subject to a take-over bid by IT firm Centric.
At the end of 2018, AVH had 74,000 participants, almost 10,000 of whom were pensioners.