The €3.7bn Dutch pension fund for the furnishing industry (Wonen) is to place its future pensions accrual with retail sector scheme Detailhandel, the pension funds and their social partners have agreed.
The parties decided against a full merger as the difference in funding levels would have required a benefit cut of 6-7%. As a result, the pension fund for the furnishing sector will keep on managing its existing pension assets and liabilities for the time being.
From 1 January 2018, the 30,000 active participants of Wonen will begin accruing new pensions at the €20bn Detailhandel scheme.
The two pension funds have been trying to merge for years, but the difference in funding levels has remained insurmountable. Currently, the coverage ratio of Wonen is 104.5%, whereas coverage of the much larger Detailhandel stands at 111%.
However, the parties involved didn’t want to delay the first step of a merger any longer, said Henk van der Kolk, chairman of Detailhandel.
“Otherwise, the participants would have been in a pension fund without a future for many years,” he said.
He added that the transfer “would offer benefits straight away, such as lower administration costs and improved labour mobility between the furnishing and retail sectors”.
The existing scheme for the furnishing industry will close to new entrants and will assess the scenarios for its future, which include joining a general pension fund (APF) or an insurer, said Pieter Verhoog, trustee at Wonen.
He explained that a transfer of pension rights to Detailhandel would have lead to a rights discount of 6% or 7% for the participants of Wonen, and was deemed irresponsible.
He indicated that employers and unions would try to bridge the funding gap through deploying some of the savings resulting from the switch to Detailhandel. Rising interest rates would also help, he said.
If the funding difference were to persist, Wonen could look at “technical solutions”, which would leave the funding advantage with the participants of Detailhandel, Verhoog added.
He said this would be complicated and would require the co-operation of both pension funds.
According to Verhoog, a rights discount for Wonen’s participants would be the very last option. In his opinion, a two- to three-year period would be needed to find an alternative for managing the existing pension rights.
As of 1 January, the closed sector scheme will switch from Syntrus Achmea to TKP as its pensions provider, after Syntrus Achmea announced that it would cease its services for industry-wide pension funds last year. TKP also carries out the pensions administration for Detailhandel.