Randstad, a Dutch temporary employment agency, is to close its €989m pension fund for permanent staff in favour of a defined contribution (DC) PPI vehicle run by APG and ABN Amro.

The company said it opted for the PPI due to low interest rates and its own “unsustainable” DC arrangements.

It also cited the “increasingly individual” matter of pensions accrual.

Randstad said accrual would continue in the PPI from 1 July, adding that active participants would be allowed to transfer pension rights to the vehicle.

Raimond Schikhof, the pension fund’s director, said participants might also have the option of transferring 50% of their existing pension rights to the PPI.

“For some participants, a value transfer could be attractive to achieve a tailor-made investment policy,” he said.

The PPI offers not only standard lifecycle investment but also an individual investment mix and the purchase of a fully guaranteed pension.

However, Schikhof said he expected most of the scheme’s 16,000 participants would opt for leaving their rights with the old pension fund, despite its modest chances for indexation.

At June-end, the scheme’s funding stood at 105.7%.

However, this is expected to fall by 5 percentage points, following the recent reduction of the ultimate forward rate, which is used as part of the discount rate for liabilities.

Randstad said it expected its contribution, under the new pension arrangements, would fall from €27m to €22m.

It said €4m of the difference would benefit workers, as their premium would be reduced from 7.5% to 5%. 

Schikhof said the remaining €1m would be used for pension provision at the closed scheme for the time being.

In its annual report, the pension fund said it would remain a predominantly young scheme, with sufficient scale.

It said it expected to maintain its portfolio mix of 55% fixed income holdings and 45% return-seeking investments.

The closed pension fund also said it would continue to explore options for a value transfer, including joining the new general pension fund APF.