mast image

Impact Investing

IPE special report May 2018

Sections

'Trapped' Dutch travel sector scheme assessing merger, switch to DC

Related Categories

The €300m Dutch pension fund for the travel sector has said it was looking for a merger with a larger industry-wide scheme or a switch to defined contribution (DC) arrangements.

Reiswerk Pensioenen made clear that continuing independently was not an option because of its funding position and its predominantly young membership. 

“The long duration as a consequence of our young population requires taking more investment risk,” said Frank Radstake, the scheme’s employer chairman. ”But the financial assessment framework (FTK) doesn’t allow us to do so because of our funding shortfall.”

The pension fund was therefore “stuck in the FTK trap.”

The small sector scheme has been in trouble since the introduction of a new and lower ultimate forward rate (UFR) in 2015, part of the discount mechanism for liabilities.

Despite a defensive investment policy, including a 90% interest hedge, the scheme’s funding level has since plummeted from 125% in 2014 to 99.5%.

In its annual report, Reiswerk Pensioenen said it was unable to hedge against the impact of the new UFR, which had caused a steep rise of its long-term liabilities.

Radstake said the UFR was expected to drop further and that the current asset mix would not solve the pension fund’s financial problems.

He indicated that the scheme’s small size – it has 9,000 active members – was another reason why it wasn’t deemed future-proof.

Joining another sector scheme or switching to DC would both give Reiswerk the option to increase the risk profile of its investments.

A merger would bring the added benefit of scale, but would also mean an instant rights cut for the scheme’s members.

“However, in the long term the results will improve,” said Radstake.

Based on its current position, the pension fund was headed for a rights discount in 2021 anyway, he noted.

The social partners in the travel industry said they wanted to make a decision about the scheme’s future next summer.

Readers' comments (1)

  • The missing option is to move the pension scheme to Belgium. Supervision there is not rule-based but risk-based, so their argument that the young population requires a different reaction would get a proper hearing.

    Unsuitable or offensive? Report this comment

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2435

    Asset class: CLOs.
    Asset region: Global.
    Size: USD 50m.
    Closing date: 2018-05-22.

  • QN-2436

    Asset class: Real Estate - Core Open-ended Real Estate Equity Fund (non-listed).
    Asset region: Asia Pacific.
    Size: Approx. CHF 70-100m per investment.
    Closing date: 2018-05-25.

  • QN-2438

    Asset class: High Yield Bonds.
    Asset region: US.
    Size: USD 300 million.
    Closing date: 2018-05-25.

Begin Your Search Here