NETHERLANDS - Dutch pension funds ABP and PGGM have reacted with dismay to plans by the Dutch Ministry of Social Affairs to overhaul the country’s industry pension funds.

A spokesman for the 150 billion-euro ABP fund, the biggest in the Netherlands, warned the proposed break up could lead to “substantial cost increases” and a possible hike in premiums.

In a letter to the Labour Foundation earlier in the week, the Ministry said it wanted to break up the industry pension along the lines of the models used – and now seemingly discarded - by corporate schemes such as Philips.

Under the proposals - prompted by the European pension fund directive - Dutch industry pension funds would have to separate policy from management and administrative tasks, with the latter company operating on the free market.

In a joint statement, ABP and PGGM said the proposals “have more disadvantages than advantages”, adding a break up “would not be in the interest of our participants and pensioners”.

The funds further call the proposed break up “unnecessary”, and fear it could erode their economies of scale.

“A situation with a separate board and a company which looks after administration and asset management will not add to a greater transparency for our participants,” the funds said.

The ABP spokesman also said the pension funds were “highly surprised” by the Ministry’s sudden announcement, particularly given the fact they are currently in talks with The Hague about pension fund governance.

The Ministry of Social Affairs refused to comment on the joint statement.