Belgian plans raise Dutch hackles
In 1830 the Belgians rebelled against their Dutch rulers and established their own state. The Dutch, it was felt, were too overbearing. There are those in Belgium who feel that such ghosts can still be discerned. And like other states that have a shared history - the UK and Ireland or Portugal and Spain, for example - there is a level of intimacy in the Dutch-Belgian relationship that adds a piquancy not found in their contacts with other states.
"In many ways Holland is still a reference point for us," says Philip Neyt, chairman of the Belgian Association of Pension Institutions (ABIP/BVPI). Indeed, when outlining the characteristics of Belgium's pensions system, Neyt chooses to do so in comparison with its northern neighbour. "The second pillar in the Netherlands is very well developed, roughly it's €1,000bn, and in Belgium it's €100bn," he explains. "They have a GDP of €600bn, we have a GDP of €300bn, so while their pensions assets equal 150-160% of GDP, ours is just 33%, so in GDP terms they have five times more in funding. But that is to overlook that the two countries are differently organised; we took a continental, Bismarckian, view where first pillar pensions are still very important, whereas others followed a more Atlantic, Beveridgian approach, like the UK, Ireland and to a large extent the Netherlands."
Similarly, when explaining how the Belgian pensions sector does not have the influence it would like Edwin Meysmans, managing director and pension fund secretary of KBC's corporate DB pension fund, also finds it convenient to cite a Dutch example. "What impact can these small players have on the regulator and politicians?" he asks. "Each pension fund is just too small. It's not like in Holland where I can imagine that if ABP speaks out politicians and the Dutch central bank listen because here is an entity that represents millions of Dutch people and billions of euros."
And the special relationship was evident in the initial Dutch reaction to the Belgian creation of the OFP not only as a vehicle for domestic pension funds but to attract foreign funds to domicile in Belgium. The Belgians were stung by the vehemence of the response of the former Dutch regulator Dirk Witteveen.
"He made speeches dismissing the OFP, saying that we had invented the car without the technical rules," recalls Neyt.
"We didn't hear this type of criticism of similar initiatives by Ireland and Luxembourg, and they were saying ‘come to us, we have the perfect vehicle' long before Belgium," adds Meysmans. "But when little Belgium dares to do something it becomes something terrible."
And insult to injury, the critics got it wrong. "The initial reaction, with questions raised in parliamentary discussions and items in the press, did not correspond to the facts," he adds.
"At the beginning they claimed the OFP represented a race to the bottom, that Belgian legislation would be very imprudent and if you wanted your pension plan to be managed by a Belgian OFP you may be sure that the funds will not be sufficient to pay your pension annuities because the discount rate that you can use in Belgium is 6%," says Lut Sommerijns, secretary-general at the ABIP/BVPI. "But the 6% is the maximum rate which one can use to calculate the minimum vested rights guaranteed by the Belgian social and labour law legislation. Therefore, it is not applicable to a Dutch plan operated by a Belgian OFP, which would be subject to the Dutch social and labor laws. Indeed 6% is not a figure you find in the Belgian prudential framework."
Bilateral contacts have since ironed out the misunderstandings, she adds.
And the Belgians are not above a little criticism of Holland's controversial new financial assessment framework (FTK). "What they have done is the one-size-fits-all," says Neyt. "They put quantitative rules, not looking to what kind of employer is behind the scheme, at the demographics or to the real ALM structure, because outputs are totally different from one pension funds to another."
Indeed the shrillness of the Dutch reaction was fuelled by fears that Dutch pension funds, that had been highly critical of the FTK during its consultation phase, would be attracted to the more relaxed Belgian regime.
"I know there were questions in Holland about when ABP or other major funds would go to Belgium but I don't think we will see any Dutch industry-wide pension funds, not the big funds, coming here," says Henk Becquaert, head of the pension department in the Belgian supervisor CBFA. "And it was not what I expected when we introduced our new law. But there will be interest from some Dutch companies that have their own pension fund. I know some will do that but it will have to take some time so it's premature to go into details."
And perhaps the Belgians should brace themselves for another Dutch invasion. One of the options open to smaller Belgian pension funds faced with the pressures of implementing new governance requirements is to join a multi-employer fund. Could a Dutch provider sell its 60-plus years of expertise and offer its platform in a new market? "Yes, that could be an opportunity for PGGM or ABP and Cordares," says Karel Stroobants, a Belgian pensions guru. "They have established a clear asset management and administration structure in Holland and they would bring an objectivity relative to the pensions market. A model based on respect for the local culture combined with the Dutch expertise and the new Belgian legal, tax and funding rules could become a success story."
But Meysmans is sceptical. "The Dutch have a language advantage in one part of the country but not in the other," he notes. "But there are some complicated structures here in Belgium so I don't think the numbers are large enough to attract the likes of Cordares to look at Belgium. "Why spend so much energy setting up an office and hiring people just a few pension funds?"