Dutch insurer Achmea to launch own pension fund
Dutch insurance company Achmea will cease offering defined benefit (DB) pension plans through its life insurance arm next year.
The company will instead begin selling DB plans through a ‘general pension fund’ (APF), which it plans to launch next spring.
According to Achmea, the pension offerings of its life insurance arm “no longer satisfy today’s demands”.
With the launch of its own pension fund, Achmea is planning to take advantage of new legislation currently being debated in the Dutch Senate and scheduled for a vote later this month.
Through the new APF vehicle, Achmea and other life insurers can offer DB schemes under the same prudential rules that apply to existing sector-wide and company pension funds.
Switching from the rules for life insurers to those for pension funds will mean insurers can start offering DB schemes financed using more risky investments, while allowing for the lowering of the accrued nominal benefits if coverage ratios drop too low.
Premiums in these plans are expected to be lower compared with those traditionally offered by life insurers, which have seen premiums increase by as much as 50% due to the low-interest-rate environment.
In addition to Achmea, Dutch life insurers Aegon, NN, ASR and Delta Lloyd have also announced the launch of APFs for next spring.
They are expected to try to move a large portion of their existing DB contracts into these new vehicles.
Achmea is the first to announce, however, that it will eventually quit selling these contracts completely, to new customers and those who wish to renew existing contracts.
It is likely to make the move “some time” after the launch of its APF.
Commercial insurance companies receive approximately 14% of the €40bn in annual pension premiums paid in the Netherlands.
The rest of the pension market is held by sector-wide and company pension funds.
The new legal option may help insurers increase their market share.
Insurers, in addition to offering pension plans directly to companies, are aiming to use APFs for buyouts of existing company pension funds.
APFs can also be launched by company pension funds themselves, as way to merge with other company funds, while ringfencing the capital of different plans.
For now, the number of pension funds planning to do so is very limited compared with what insurance companies have announced so far.
Sector-wide funds, which account for the largest share of the Dutch pensions market, are presently excluded from merging with newly launch APFs.