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Impact Investing

IPE special report May 2018


Belgium's silver fund gets green light

The Belgian government has given the green light to the implementation of both the proposed ‘Silver Fund’ reserve and to the establishment of industry-wide pension funds.
However, concerns are being raised about discussions taking place over guarantee rates for defined contribution (DC) plans, which observers say could wreak havoc in the country’s pensions industry.
In his state of the nation address on October 18, prime-minister Guy Verhofstad signalled that the silver fund (Fonds de Viellissement), the reserve fund the country hopes will stave off its future pensions/demography crisis, would receive its initial funding from the sale of Belgian mobile telephone licences.
Projections show the amount needed for the fund could reach around Bfr4.7trn by 2010.
According to the Belgian finance ministry the telephone licence sales should bring in between Bfr40bn– 60bn, although not all of this will go to the silver fund. Following that, the fund is expected to be fed by between 0.2% and 0.3% of GDP – or Bfr25bn–35bn a year up until 2010. The government will also add money from its debt reduction programme into the fund. Investment is expected to be solely in government bonds.
Approval for the industry-wide pension funds is designed to ameliorate the fact that only one in three employees in Belgium is currently in an occupational scheme.
Fabrimetal, the recently formed pension fund for metal workers heralded a sea change in Belgium – a DC pension fund with guarantees – for all employees in an industry sector.
Hervé Noël, deputy financial manager at the Brussels-based Tractebel pension fund says there is debate in Belgium at the moment, however, over such guarantee levels suggested by the government for DC plans.
“There is talk of setting a legal minimum guarantee rate of 3.75% for all DC plans, which could be catastrophic for the industry as a whole,” he says.
“It wouldn’t be so bad if the amount suggested was less but if you have to run a pension fund on the basis of a very static view it could be very panicky for the pensions industry. Pension funds should be able to take a much more dynamic view.
“This could be a very sound evolution in terms of some guarantee for DC protection but still allowing the sector to remain competitive.”
Noël says the government is likely to give a firmer view on this at the beginning of November.

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