Belgium baits the hook for Dutch pensions
As befits neighbours, Holland and Belgium do not shy away from jurisdictional pension rivalry. But Belgo-Dutch relations, already sensitive, have been tested further since Belgium enacted its new pension law in January, which created a new legal vehicle for pension funds, the Organisation for Pension Funds (OFP).
Since then, the Belgian government has encouraged pension funds to domicile across the border where the people are friendly and the demands on coverage ratios are less stringent. Belgian Prime Minister Guy Verhofstadt has taken every opportunity, including openly criticising new Dutch legislation, to promote its new system.
And why not? The OFP carries certain tax advantages over previous Belgian vehicles and current Dutch ones, and the recently introduced Dutch assessment framework, FTK, is, arguably, over-engineered, imposing the constraints of a Rolls-Royce solution to a VW Beetle problem.
Holland, priding itself on being a centre of pension excellence, has tried to keep up appearances. Yet cracks started to show when, in early April, the Dutch pension regulator, De Nederlandsche Bank (DNB), passed judgment on the Belgian charm offensive and called for quick harmonisation of pension requirements within the European Union.
Politicians such as Christian Democrat Pieter Omtzigt started campaigning for government intervention, and FNV Bondgenoten, Holland's largest labour union, has become worried that less wealthy pension funds will defect to dodge the demands of FTK.
Subsequently, the newly appointed Dutch social affairs minister, Piet Hein Donner, whose stoical outlook has, until now, encouraged the feeling that things are not quite as bad as they seem, has had to back down to the extent of announcing that he would examine the implications of Dutch pension funds moving to Belgium.
Amid such growing concerns it is fair to ask: are Dutch pension funds really considering a move to the pension paradise that Belgium makes itself out to be to escape the FTK?
Industry-wide pension funds say they are unimpressed: "We're not going anywhere," said a spokesman for the €800m industry-wide pension fund for pharmacy workers, PMA.
"We have the best pension system in the world," argues Nico van Beusekom of the €1.1bn butchers pension fund's co-administration council. His fund would never consider moving, although he concedes that his fund has had its run-ins with the FTK.
The fund has almost 40% allocated to real estate. However, the DNB says that a fund, under the FTK, should not have more than a third of its entire assets invested in real estate.
The fund does not agree. Though acknowledging that real estate is no panacea and should be looked at with caution, the asset class traditionally has done the fund many favours, it argues. However, the scheme is confident that it can reach an agreement with the DNB.
The overall message from the industry-wide pension funds is that there will be no exodus to Belgium. Nicolette Drop, spokeswoman of PH&C, the €2bn pension fund for the Dutch hotel and catering sector says: "We are a true industry-wide pension fund in the Netherlands, and if you look at pension funds like ours, who purely deal with the Dutch market and deal with Dutch partners, then it is not so attractive."
Peter Borgdorff, director of the Dutch association of industry-wide pension funds (VB), has stated: "No industry-wide scheme is considering a move to Belgium. The financial security offered by the FTK is too important to them."
The VB also thinks it a myth that Dutch pension funds could profit from the Belgian 70% cover ratio, as opposed to the Dutch 130%, since the European guidelines require a ratio of 105%.
Nonetheless, smaller pension funds, and some industry-wide ones, are unsure. The Hague-based €50m pension fund for the recovery of raw materials sector, for example, is considering a move because, it says, the numerous rules and regulations in the Netherlands are becoming too expensive for a small fund.
Moreover, DNB director Dirk Witteveen's speech at the recent VB member conference in mid-April was not that of a confident regulator, unworried by developments.
Pension funds could be faced with disappointing results when they move to Belgium, Witteveen warned, saying that Belgium is trying to "sell a car without having the technical specifications yet".
This prompted Philip Neyt, the chairman of the Belgian Association of Pension Institutions and the driving force behind the Belgian legislative changes, to accuse Holland of protectionism.
Witteveen emphasised that the Netherlands do not need a sales pitch similar to that of Belgium, which, he says, has partly copied its system from Holland. "Good value sells itself," he says.
The speech betrayed wider worries that the Dutch pension sector is not alert enough when it comes to keeping its international pole position. These concerns have already prompted government-sponsored proposals for a so-called API, a new pan-European vehicle enabling Dutch pension schemes to reform into Europe-wide pension providers - a sign that cross-border pension activities, allowed by the European pensions directive since the beginning of this year, have stepped up the international rivalry.
Yet there are few overt signs that pension funds are contemplating a move. Most corporate pension funds say they are not interested, and although the OPF, the Dutch umbrella organisation for corporate pension funds, says it has discussed the option, this was met with little interest.
Dick Kamp of the €400m Laurus pension fund, though himself not considering a move, can see why some pension funds might want to consider the Belgian option. "It is a serious long-term option for pension funds with sponsors who work internationally," he argues.
He can also see why smaller pension funds might consider Belgium seriously: "Unknown makes unloved," he says, arguing that not all pension funds are professionally organised, with boards that are there to run the fund day in day out.
Another problem is that the FTK forces funds to take the short term into consideration, even though a pension scheme operates in the long term, argues Kamp.
He says of his own fund: "We are a very Dutch-orientated corporate pension fund, Laurus does not have any businesses abroad. It would show quite some opportunism if we'd consider a move."
He suspects that the Belgian debate might be more internal criticism rather than a real threat.
Yet it all comes down to regulation and the financial consequences, Kamp admits. If the regulator puts tough demands on the financial position of pension funds, they suffer."Perhaps we are a bit too rigorous in the Netherlands at the moment." On the other hand he expects that, in the next five to 10 years, legislation will be streamlined anyway, and differences between countries will diminish, making a move not worth the effort.