The Dutch government has abandoned legislation aimed at enabling mandatory industry-wide pension funds to merge.
In a letter to parliament, social affairs minister Wouter Koolmees said he would consider alternatives to achieving benefits of scale for sector schemes that wanted to consolidate.
The decision followed fierce criticism of the proposed bill from both the pensions sector and parliament. All said that the legislation – tabled by the previous government – would make mergers needlessly complicated.
Last April, the lower house of the Dutch parliament welcomed additional options for consolidation in the pensions sector, but had also made clear that the proposed legislation was the wrong instrument.
It cited the stringent conditions attached to a merger, which would have allowed schemes to temporarily keep their assets ringfenced if the coverage ratio differed too much, allowing different funding levels to gradually converge within a five-year period.
Several political parties linked their criticism to objections voiced by the sector.
In October, the Dutch Pension Federation asked the government to withdraw its bill, because of the multitude of constraints set for a merger between sector schemes.
It highlighted the condition that merger partners with assets above €25bn would be excluded from the proposed rules, limiting the options for small pension funds to join larger ones.
Speaking to Dutch financial newspaper FD, Pension Federation director Gerard Riemen said that, under the proposed rules, six smaller schemes in the building industry would not be allowed to join the €56bn BpfBouw, the main scheme for the sector.
In addition, the planned legislation required potential merger partners to be affiliated and that no more than five pension funds could merge into a new scheme.
Moreover, merger partners would have to split up if their funding levels failed to converge within five years.
The federation also indicated that the proposed solutions for bridging funding differences between merging schemes, and letting participants benefit from increased scale, were not workable.
The Pensions Federation said it was pleased with the minister’s decision to withdraw the bill.