NETHERLANDS - ING, the Dutch financial services group, will offer its employees a 'collective DC' pension arrangement starting in 2014, ending one of the last final salary pension arrangements in The Netherlands.
The company and trade unions reached an agreement detailing the new arrangement, which will be modelled after a collective average salary scheme, while limiting risks borne by the sponsor company.
Risks associated with funding shortages will be borne by the scheme's participants rather than by the employer.
ING has agreed to pay a one-off premium to compensate for the risk transfer.
The pensionable age in the new scheme is raised to 67.
The new collective DC arrangement will be managed by two separate pension funds - one for bank employees and another for the employees of ING's insurance and asset management businesses.
Because ING had to be bailed out by the Dutch government during the financial crisis, the previous European commissioner for competition, Neelie Kroes, ordered the company to split up its banking and insurance activities.
Pension fund director Daan Heijting told IPE sister publication IPNederland as early as last summer that this move might require splitting the existing pension fund in two.
Heijting manages the existing €13bn ING pension fund, which reported a funding ratio of 126% as at the end of May.
While in the current scheme the employer pays for inflation compensation, in the new arrangement responsibility for indexation will shift from the employer to the two pension funds.
ING has declined to pay for indexation for a number of years now.
Last February, the financial services company decided for the fourth consecutive year that it could not honour its obligation to pay for inflation compensation for the scheme's 16,120 pensioners and 29,790 deferred participants, citing "grave arguments", including more stringent capital requirements, continued uncertainty in financial markets and paying back the government bailout.
The scheme's participant council was incredulous, pointing out that ING had earned a €5.8bn profit in 2011.
In the new scheme, ING has agreed to buy indexation for its plan's pensioners and deferred participants annually, foregoing the right to cite "grave arguments", provided the company pays a dividend - a practice the company plans to resume in 2012 after no dividend payments were made in 2009, 2010 or 2011.