Dutch low-cost DC vehicles ‘will disappear by 2025’

The Netherlands’ specialist low-cost defined contribution (DC) vehicle, known as PPI, will disappear by 2025 because they do not make sufficient difference in a consolidating market, according to research firm GfK.

In an article in Dutch insurance magazine AM:, Robin Hardeveld Kleuver, financial services consultant at GfK, said that the low-cost element of the PPI would probably not be sufficient to differentiate it in the future. 

He argued that the PPI merely implemented DC arrangements in the accrual phase, whereas the newer general pension fund (APF) vehicle could offer various arrangements, including the PPI’s proposition.

“Leaving both in their current configuration doesn’t seem to be a serious option, and therefore saying goodbye to the PPI seems to be a matter of time,” concluded Hardeveld.

He also predicted that, by 2025, the number of industry-wide pension funds would have dropped from 58 to 30, and that the number of company schemes would be 50, rather than 183 at the moment.

The consultant also expected that there would be five occupational schemes and five APFs left by then – there are currently nine occupational schemes and seven APFs operating in the Netherlands.

Pensions lawyer Hans van Meerten, who co-wrote the PPI bill, said he was surprised about GfK’s prediction.

In his opinion, the fact that PPIs were pure DC vehicles was an advantage, as they can provide services cheaply and efficiently.

“Contrary to an APF, a PPI doesn’t have the burden of implementing complicated benefit arrangements,” he said.

Jan Hein Rhebergen, commercial director of PPI BeFrank, added that the APF seldom appeared to be a competitor during tendering processes.

He said he expected PPIs to keep on growing in the market for employers, but acknowledged that consolidation would also continue.

“Sufficient scale is necessary to keep on offering a decent and affordable pension,” Rhebergen said.

Since the recent takeover of Delta Lloyd by NN Group, Delta Lloyd’s PPI BeFrank and NN’s PPI have announced plans to merge, which reduces the total number of PPIs to seven.

The new combination is to continue under the Be Frank brand, and will be the market leader with combined assets of almost €2.5bn.