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IPE special report May 2018

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Netherlands roundup: Oil scheme finalises transfer to PGB

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Archimedes, the pension scheme of oil companies Q8 and Gunvor has transferred to multi-sector fund PGB.

The pension scheme had considered the move before but wasn’t sure if it could be completed because of the narrow difference between the funding levels of Archimedes and PGB. If the level for Archimedes had dropped below that of PGB, it would have meant a pension cut for the smaller fund.

The €580m Archimedes fund said on its website that worker councils and the regulator had granted permission for the transfer. It completed on 1 January 2018.

In recent months, market and interest rate developments turned out to be in favour of Archimedes, according to its chairman Hans Thomassen. The fund had a funding level of 111.3% at the end of 2017, while PGB’s funding ratio was 108.9%.

Nedlloyd scheme grants indexation payment

The €1.4bn pension fund for former Dutch shipping company Nedlloyd has announced indexation of 1.35% for this year.

Last year the fund paid out just 0.05% as an index-linked bonus payment to participants, saying that the nFTK calculation model was “very stifling”.

Dutch pension schemes can pay their participants a full index-linked payment if their funding ratios are around 122%. Nedlloyd’s funding level was 120.7% at the end of September 2017, meaning it could pay 90% of the full indexation amount.

Last year the Nedlloyd pension fund said it was still struggling with the rules of the nFTK. It argued that the calculation method did not offer enough help for a fund with a large number of pensioners.

Even though the scheme was able to grant a better level of indexation this year, director Frans Dooren said the complaint was still relevant.

“We can award very little in periods with low inflation,” he said. 

The fund’s growing number of pensioners have had to wait too long for catch-up payments, Dooren added. 

The Nedlloyd scheme investigated an alternative model of aiming for a fixed indexation of 2% or more. Dutch schemes can select this option or choose to link annual uplifts to wage inflation or price inflation.

However, after an analysis the resulting pensions were found to be only marginally better, with an increased risk of benefit reductions in the first five years, and so it was rejected.

Improving funding levels have led to several sector schemes announcing indexation payments for 2018.

Watchdog overshoots budget for transition to general pension fund

Communication watchdog Authority Financial Markets (AFM) has exceeded its budget for the transition of its pension fund into a general pension fund by €1.4m, a spokesman confirmed.

Total costs of the transition to De Nationale APF – the general pension fund (APF) established by NN Investment Partners and its subsidiary AZL – amounted to €1.9m.

The AFM said that it had underestimated the complexity of the tender it had to put out under European legislation.

“The external pensions adviser and the Pensioenfonds AFM had estimated costs before the tender had started and only the main elements of the transition had been clear,” it explained.

The spokesman said the AFM had not taken into account additional legal costs, the transition costs of the investment portfolio and higher liquidation costs of the pension fund.

The supervisor indicated that it would recoup its overspending over the course of this year from the organisations under its supervision, including pension funds, which account for 3.5% of total supervision costs.

The AFM’s pensions have been expensive for years. Following the 2013 liquidation of Mercurius – a company pension fund for schemes of financial institutions including the AFM and EuroNext – the watchdog had to start its own pension fund.

However, the set up process turned out to be more expensive than expected and the new pension fund appeared to be too small from the start, with administration costs of €770 per participant and combined asset management and transaction costs of 0.83%. Both figures are higher than the average for Dutch schemes.

As of 1 January, the AFM pensions are managed by the APF and structural annual costs savings would be €135,000, according to the spokesman.

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