NETHERLANDS – The €1.2bn occupation pension fund for notaries (SNPF) indicated that it is “seriously” looking into the options of co-operation with another pension fund.
Eric Uijen, appointed the scheme’s director in September, told IPE: “Although we don’t consider us as being in the danger zone, we think that joining a related scheme could strengthen our position.”
According to Uijen, one of the potential schemes for co-operation would be the €835m pension fund for notaries’ staff (SBN). SNPF has already started discussions with SBN, he said.
SNPF reported a funding position of 99.9% at the end of May after two successive rights discounts of 5.8% and almost 2%, respectively. SBN’s coverage stood at 98.6% at the end of June, after rights cuts of 2.1% and 7%.
Uijen said that there could be further cuts to come. “Possibly, we need to prepare our participants for a third cut at year-end, when our minimum coverage must be 104.4%.”
The notaries scheme has been hit hard by the financial crisis – its funding plummeted to 86.5% in 2008 – while its participants are suffering from the slump in the housing market as well as from increased competition.
The pension fund had to make an additional provision of 1.75% of its liabilities for population-specific life expectancy, added the director.
Since 2008, SNPF saw the number of active participants drop by 450 to 3,145.
Last year, the scheme found that its administration costs per participant were €661, compared with €268 for similar-sized pension funds. And with 0.42%, its asset management costs were also relatively high.
It further established that its extensive governance structure – with a 16-strong pension council in addition to legally required arrangements - had a price tag of €124 per participant.
In order to improve its financial position, SNPF recently decided to pare down its pension plan. It is also to appoint an external pensions provider later this year, which should also modernise its out-dated and analogue administration.
By dividing up its assets into a matching portfolio for managing its interest risks and a return portfolio to improve its funding, the scheme also aimed at cost-cutting through simplification of its asset management, Uijen pointed out.
He added that, following the board’s decision to shun high-costs and complex investments, SNPF is to disinvest its 4.9% private equity allocation as well as its 0.7% holding in direct property.
Moreover, the pension fund has ignored the recommendation of its 2011 asset-liability management study (ALM) to establish a commodities and a non-listed property portfolio, the director said. A new ALM study is to be conducted later this year, Uijen made clear.
To decrease asset management costs, SNPF has also converted all performance-related fees into fixed ones.
A recent survey suggested that approximately 80% of the scheme’s active participants prefer to have a choice of pension fund, and that 50% expect to generate better returns themselves than SNPF, which delivered 12.2% over 2012.
However, Uijen put this outcome into perspective. “If we ask additional questions about the alternatives, the response is often less clear cut,” he said.
In his opinion, solid communication would be the best way to turn the negative sentiment amongst the participants.
In his opinion, solid communication would be the best way to turn the negative sentiment amongst the participants.
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