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New pensions system 'not what we need', says €8.7bn KLM pilot scheme

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The board of the €8.7bn pilot scheme of KLM is not keen on a new pensions system, its vice chair has confirmed.

Evert van Zwol told IPE that the pension fund considers itself ready for the future because of its new collective defined contribution (DC) arrangements as well as its individual DC plan for pensions accrual above the tax-facilitated limit of €105,000.

In its annual report for 2017, the board said that “not much needed to change”, and that it would resist “pension adjustments that didn’t fit the scheme and its participants”.

Last year, the pension fund agreed with the employer to switch from defined benefit (DB) to collective defined contribution (CDC) arrangements, with KLM paying €194m into the scheme’s indexation pot as a one-off additional contribution.

It also introduced a variable investment pension, as the last missing piece in its individual DC plan.

“This way we are well prepared for a future with possibly individual pensions accrual and further limits to the tax-facilitated accrual,” the board said.

Van Zwol said: “We now have a complete range of pension plans that will be sufficient for a number of years”.

“Although we are ready for the pensions contract that employers and trade unions will come up with, it’s not what we need,” he added.

“Our participants are satisfied with our current arrangements, and it would be nice if we would be left alone for some time.”

Portfolio reorganisation in the pipeline

In its annual report, the pension fund indicated it wanted to reorganise its equity portfolio.

KLM airline scheme nets 10% gain in 2016

It said it intended to switch the emphasis from regional to global investments and also improve the balance between its currently overweighted holdings in Europe and its underweighted stake in the US.

It added that it also wanted to review its fixed income portfolio.

The KLM scheme posted an overall result of 7% for 2017, in particular thanks to a 14.7% gain on its equity investments, which it attributed to active managers in both Europe and Asia Pacific.

Fixed income generated 2.5%, largely due to the performance of high yield investments, it said.

Its property investments yielded 8.7%. The pilot scheme said it had merged European real estate in its matching and return portfolios in order to achieve a less complex and more efficient European private property portfolio.

The pension fund incurred administration costs of €912 per participant and spent 0.48% and 0.20% on asset management and transactions, respectively.

It said it was seeking to reduce costs by abolishing the options of a part-time pension as well as additional pension saving. It would also deploy fewer investment pools, it added.

The pension fund closed last year with funding of 127.1%, enabling it to grant its participants full inflation compensation.

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