The Dutch pension funds for the confectioners and bakers industries plan to increase their co-operation, with a full merger as likely outcome.

Leonne Jansen, chair of the €2.5bn scheme for the confectionery sector (Zoetwaren), told IPE’s sister publication Pensioen Pro that both pension funds wanted to sign an agreement confirming their intention to join forces later this year.

Both pension funds have already been working together closely in order to save costs, which Zoetwaren said had led to combined savings of €700,000 for pensions administration and €800,000 for asset management, largely through lower fees.

In its annual report, Zoetwaren said that the co-operation had been extended to introduce regular joint meetings of both schemes’ boards and investment committees, as well as a joint approach towards their joint provider TKP Pensioen and asset manager NN IP.

Jansen suggested that Zoetwaren’s switch to a new actuary had given the schemes a better negotiating position, as outsourcing partners had indicated that they were keen to keep the potential merger partners as clients.

She noted, however, that the funding difference between the two schemes posed an obstacle to the merger that remained to be solved. Zoetwaren’s coverage ratio was 112.9% at the end of April, more than 10 percentage points higher than the bakers’ scheme.

Zoetwaren’s chair added that increasingly complex legislation, time pressures on trustees, and requirements for continuity of board and accountability body (VO) had all contributed to the need to increase co-operation.

Leo van Beekum, chairman of the €3.9bn bakers scheme (Bakkers) confirmed the merger plans, but emphasised that concrete decisions would only be taken after the VO and the supervisory board (RvT) had been consulted.

Zoetwaren reported returns on investment of 4.4% for 2017, and said that it had extended its return portfolio by 5 percentage points to 60%, through an increased allocation to high yield bonds (3%) and property (2%).

At the same time, it reduced its matching portfolio by an equal amount to 40%, through fully divesting its holdings of inflation-linked bonds, as well as selling part of its credit portfolio.

It said it would increase its holdings of residential mortgages at the expense of corporate bonds this year, and announced a strategic shift from Dutch property to European and US real estate during the coming years.

Construction company seeks to transfer legacy pensions

Elsewhere, the €1bn pension fund of construction firm Ballast Nedam said it was considering placing its accrued pension rights with the €25bn multi-sector scheme PGB.

In its annual report it said that other options were to join a general pension fund (APF) or continue as a closed scheme, after the employer announced it would terminate its contract with the pension fund as of 1 January.

In 2016, the company scheme outsourced pensions accrual for its basic arrangements to BpfBouw, the €56bn pension fund for the building sector.

Michel Lind, director of the Ballast Nedam scheme, explained that the option of also placing the accrued pensions with BpfBouw was not feasible, as its funding ratio of 108.6% at March-end differed too much from BpfBouw’s funding of 116.7%.

At the same time, PGB’s coverage ratio stood at 107.7%.

The pension fund of Ballast Nedam has 684 active participants, 3,783 deferred members and 2,375 pensioners.