Sections

Dutch cross-border IORP could launch 15 new schemes in a year

Related images

  • Dutch cross-border IORP could launch 15 new schemes in a year

NETHERLANDS - As many as 15 new defined contribution (DC) schemes could open by the end of next year following the introduction of the cross-border Premium Pension Institution (PPI) in the Netherlands, Mercer has predicted.

The Dutch Upper House earlier this week passed a bill allowing the establishment of PPIs from the New Year. It brings to a close over three years of negotiations on the shape of the country's response to the IORP Directive, introducing a cross-border DC framework.

Tim Burggraaf, a consultant at Mercer, said that the country's Ministry of Finance expected the establishment of 10 schemes by the end of next year, while Mercer was aware of several other companies considering their options.

"I think if I know nine and they know 10, we probably don't know the same ones. I would say that would probably get you to 15 or so."

The prediction comes despite figures from the Committee of European Insurance and Occupational Pensions Supervisors showing that while seven cross-border funds had opened in the 12 months since June last year, the same period had also seen the closure of five.

However, Burggraaf argued that companies such as Robeco were already preparing to launch their first PPI scheme and he expected foreign financial institutions to take note and decide to move into the Dutch market.

"The UK financial market is very well developed and there are products available there that are not yet being made available wide-scale in the Netherlands, such as passive investment funds."

Burggraaf argued that structured DC plans were another vehicle the UK market could export, believing that the ease of setting up a PPI would allow companies to leverage their products from Holland.

Hans van Meerten of Holland Financial Centre believes the fact that PPIs relatively simple and designed specifically for DC schemes would also give it an advantage over rival cross-border offerings, such as Luxembourg's SEPCAV and the OFP introduced in Belgium.

"The Belgian OFP can also operate DB schemes. That seems a plus, but in practice it means that more requirements have to be met in order to get a license from the supervisory authorities. So for DC only, a PPI is a better solution," he said.

Van Meerten, who was involved in drafting the PPI legislation, however conceded that there were no major differences between SEPVAVs and his proposal.

"The reason why the PPI is more attractive however is because of the Dutch reputation and knowledge with regard to pensions management and pension schemes," he said, arguing that the country had a long and sound tradition.

However, Burggraaf said that there was still much work to be done. While he argued that previously, Mercer would have to advise clients to go to Ireland, the UK and Belgium for cross-border pension vehicles, the Netherlands was finally a contender.

"We are now on the shortlist. I'm not saying we're winning, but we are on the shortlist."

Explaining the reason for the almost four years the Bill spent being debated, van Meerten said that there was a fear in some quarters it would lead to the wide-spread introduction of DC schemes in a country that was still predominantly defined benefit-oriented.

However, he dismissed these concerns, saying: "The fact still remains that social partners choose to go to DC or not. If they do, they can choose the PPI and if not, the PPI will not force them into DC."

Burggraaf says that despite being designed as a "quick and dirty" solution for DC schemes to allow further debate on other models, concerns from left-leaning parties had hindered the implementation of the PPI.

While a DB-based model is under discussion, he was not hopeful about its introduction.

"Personally, I don't think it will ever see daylight."

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • DS-2497

    Closing date: 2019-01-09.

  • QN-2498

    Asset class: Fixed Income Investment Grade.
    Asset region: Global Developed Markets.
    Size: $50m.
    Closing date: 2019-01-07.

  • DS-2499

    Closing date: 2019-01-02.

  • DS-2500

    Closing date: 2019-01-10.

Begin Your Search Here