NETHERLANDS - Dutch company pension funds will be allowed to merge their activities into a multi-company scheme as the cabinet has backed a proposal by social affairs minister Piet Hein Donner to amend the current Pension Act accordingly.

The amendment will enable company pension funds to join forces with other company funds, in order to benefit from highly necessary economies of scale in asset management, purchasing and administration, though new rules stipulate the financial assets of the individual pension schemes can be kept ring-fenced.

At the same time, the creation of multi-company scheme arrangements should make it easier to meet the required level of management expertise.

The modification of the Pension Act follows a recommendation by the Foundation for Labour (STAR), a consultative body for employer organisations and unions, and was shared by lobby-organisations OPF, VB, UvB and the Trade Association of Private Insurers.

Small company pension funds are finding it increasingly harder to meet the Pension Act requirements, particularly in the area of governance, according to the cabinet.

"They have trouble finding people with the necessary expertise for their management" and other pension bodies like the advisory board and the member council," according to government officials.

The number of company pension funds in the market has dropped sharply in recent years. In 1998, there were 938 company pension funds but this number had fallen to 597 by the end of 2007.

The cabinet has sent the proposed bill to the Council of State for its advice.

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