The report’s release stirred up emotive discussion among delegates, who disagreed on how far the supplementary pensions debate could and should be moved forward by the EC directive.
Karel Stroobants, chairman of the Belgian Association of Pension Funds, said: “I think the commission will accept the De Ryck proposals on freedom of investment. I also hope it will go for the greater emphasis on matching liabilities with investments, and I think the DMFR [dynamic minimum funding_requirement] will be accepted. If we get these three then we will have already achieved something.”
De Ryck said he believed the Commission would opt for DMFR and the split of trustee responsibility from the company.
The ensuing debate focused on issues of security and investment risk.
Jean Frijns, chief investment officer at Dutch fund ABP, pointed to problems with current measurement of asset/liability valuations.
He noted that traditional “prudent” valuations ignored short-term risk and that halfway valuations of assets only were inconsistent and misleading.
“The picture of financial strength is misleading. For example, when interest rates dropped to 4% last year, asset levels jumped and pension funds looked rich when in fact they weren’t.” Frijns also warned against believing in a never-ending boom market.
David Spina, president and COO at State Street, called for optimism, noting that pension reform could create a “virtuous cycle” with retirement savings providing a source of investment capital to foster innovation and entrepreneurship, bolster growth, create jobs and raise incomes.
He pointed to the US pension fund “revolution” that changed the culture of US business with improved corporate governance and forced accountability.
Hugo Lasat, managing director of Brussels-based Cordius Asset Management, pitched a pertinent question to the audience: “Do we really need any cap on equity holdings?”
He added: “The investment performance evidence shows that a natural exposure would be 100% in equities. Any shift away from this should be analysed in terms of cost and benefit and the financial strength of a scheme.”
Franz Ballendux of William M Mercer in Amsterdam, retorted: “1, the long-term returns of equities are good, but how do we deal with the short-term blips? Let us not forget the equity slump of the 1970s.”
Willy Lenaerts, president of the Belgian supervisory authority, said the country had already implemented many of De Ryck’s recommendations. He also attacked companies in Europe still allowed to pay pensions through the book reserve system.
He said: “We are completely against book reserves and believe they should be forbidden. They create unfair competition between employers on their basic business because some companies use them for self-financing. Separating the assets from the employer offers greater security for the participants.”
Arend Vermaat, chairman of the management board at the Verzekeringskamer Dutch regulator, asserted that the DMFR be more integrated with issues of fund solvency.
He also questioned the negativity of the Pragma reporting on external insurance protection for pension schemes.
“It is optimal for a system to have a guarantee that pension fund members will keep their rights whatever the circumstance. Who pays for this is the internal problem for the fund.”
Vermaat also reminded delegates: “We are looking for a European directive and the possibility of pan-European pension funds here. Without fiscal harmony we can forget everything.”

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