NETHERLANDS - The Dutch parliament has endorsed a new pension vehicle that would be able to carry out cross-border defined contribution (DC) arrangements.

Based on the EU Pension Directive IORP, the Premium Pension Institution (PPI) will enable pension providers to offer DC schemes across Europe.

It will not, however, be allowed to insure risks for longevity or surviving relatives, or offer guaranteed returns.

The OPF, the lobbying organisation for company pension funds, said multinational companies in particular had expressed a need for pan-European vehicles that can organise pension arrangements for all employees in different European countries.

Arnold Jager of consultant Hewitt Associates said: "Although we don't know the volume of the market, we do know the interest for setting up a PPI is significant.

"At the moment, we are advising a dozen local insurance companies that intend to start a Premium Pension Institution."

Jager said he was convinced foreign players would also be interested in starting a PPI in the Netherlands.

Tim Burggraaf, European partner at consultant Mercer, said: "As the pension systems elsewhere in Europe are largely DC-based, the potential market is huge."

He predicted all DC assets in the Netherlands might eventually be managed through PPIs.

"I am expecting a considerable shift in the market, which has already started with low-cost lifecycle products," he said.

Burggraaf noted that, although it has taken three years to get the PPI through the Dutch parliament, its Belgian equivalent - the Organisatie voor de Financiering van Pensioenen, which also accommodates DB arrangements - has already taken root.

"A few multinational companies are already carefully trying out the vehicle," he added.

According to Burggraaf, Mercer is also advising some players who want to set up a PPI.

The PPI legislation, which still needs to be ratified by the Dutch senate, is expected to go into effect in the fourth quarter.

Meanwhile, BinckBank and insurer Delta Lloyd will launch a PPI through a joint venture, with equal stakes for both parties.

The new company, called BeFrank, said its costs would be half of those of comparable providers of collective pension arrangements, adding that it would focus on companies with more than 500 employees.

Koen Beentjes, chief executive of BinckBank, said: "We are convinced our concept of excellent online services against competitive prices will deliver more pension assets through lower costs, and that employees will start considering pensions as a comprehensible online financial product."
 

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