Most Dutch pension funds that plan to make the transition from defined benefit (DB) to defined contribution (DC) want to do so in 2025, according to a survey by pension regulator DNB. The regulator has warned about capacity constraints if too many funds choose the same transition date.

“In terms of timing we expect most pension funds to make the transition in 2025. A small group of funds expects to switch already in 2024,” said Cindy van Oorschot, director of pension supervision at DNB, in a speech on Tuesday, at the annual congress of IPE’s Dutch sister publication Pensioen Pro in Amsterdam.

Van Oorschot echoed her colleague Else Bos’s earlier warnings that a “transition peak” could lead to capacity problems with pension administrators, consultants and regulators. 

However, she added that capacity constraints at DNB have now been eased as the regulator has been promised an additional budget totalling some €25m earmarked for the pension transition. “Hence we will make sure to manage any possible transition peak,” Van Oorschot promised.

Half of pension schemes expect to make transition

According to DNB’s latest survey, half of Dutch pension funds have indicated they are planning to make the transition to the new DC pension system by 2027.

Since the five largest pension funds are among these, the schemes that are planning to switch to DC account for some 85% of total pension assets.

One third of pension funds are yet to make a decision whether or not to switch to DC while 20% of funds have chosen to remain in the current DB framework and, consequently, close for new accruals. A third of this latter group concerns closed funds without an associated employer.

One year ago, DNB also surveyed pension funds on the same question, but with a different result: at the time, 70% of funds said they planned to make the transition.

According to DNB, this year’s results were not exactly comparable to those a year before, because at the time funds were only given the choice between either ‘yes’ or ‘no’.

“Back then, they could not say they didn’t yet know. A large share of the funds that answered ‘yes’ last year, have now replied ‘don’t know yet’,” a DNB spokesperson said.

On track

Though all signs point towards renewed delay in the implementation of the pension reform, Van Oorschot clinged to the official expectation that the new pension law will come into force by 1 January 2023.

She said: “As a supervisor, we cannot assume a delay, so for now we focus on the official timeline so we are ready to accompany the transition as of next year.”

According to the DNB director, it is too early to say whether a one-year delay will also lead to a similar delay in the ‘peak transition’.

In general, pension funds tend to be ‘on track’ with their preparations for the pension transition, according to Van Oorschot.

“Almost all funds are reporting to us that they have mostly or entirely mapped their necessary milestones for the transition. That is good news,” she said. “At the same time, however, there are also funds who still don’t know when they expect to send their decision on the transition and their implementation plan to DNB.” she added.

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