The Dutch pension fund for the wood processing and yacht building industry (Houtverwerkende Industrie en Jachtbouw, PHJ) has cancelled its plan to merge with furniture scheme Meubel.

The “limited benefits” of the transfer do not outweigh the large cut in pension rights that would follow the merger, PHJ’s president Jeroen van den Heuvel said.

The two funds signed a declaration of intent in February to transfer PHJ’s pension rights to Meubel by 1 January 2022.

“But in the conversations we had afterwards, some aspects turned out differently than we had expected,” said Van den Heuvel.

“That’s why we have decided to pull out of the planned merger, jointly with social partners,” he added.

PHJ has now started a search for another sector fund to merge with, as the €600m fund is considered to be too small to continue independently in the long run.

Funding ratio gap

The large difference in funding ratios between PHJ and Meubel was “a major factor” in cancelling the planned merger, according to Van den Heuvel.

At the end of April Meubel’s funding ratio stood at 115.2%, which is almost 17 percentage points higher than PHJ’s at 98.3%. When the two funds signed their declaration of intent in February, the difference was much smaller at just 10%.

The large funding ratio gap meant there would have been a high chance of a significant cut in pension rights for PHJ members on 1 January 2022.

Meubel wasn’t able, however, to provide sufficient guarantees “about the future durability and an improvement of investment returns of the new pension fund” in exchange, Van den Heuvel wrote on the PHJ’s website.

“In the end you need to get a result that you can defend in front of the members. This wasn’t the case here,” he explained.

Petra de Bruijn, the president of the Meubel fund, said she understood the large cut in pension rights at the time of the merger would be difficult to stomach for PHJ.

“In the current system, a one-off cut can be compensated in future years [through indexation]. But as we will soon make the transfer to a new pension system this time that’s not as straightforward.”

De Bruijn did not agree with Van den Heuvel’s suggestion that Meubel is not futureproof or making insufficient returns. “We have more than €6bn in assets under management and our investment results have been very reasonable,” she said.

New selection process

PHJ is still aiming to merge with another pension fund and will therefore start a new selection process to this end. “I don’t expect Meubel will again come forward as the best candidate, but we will not exclude it from the start,” said Van den Heuvel.

De Bruijn said she is open to renewed conversations with PHJ despite Van den Heuvel’s criticism. She said there were currently no ongoing conversations with other pension funds.

Early last year, the Dutch sector scheme for the timber trade (Houthandel) was the last pension fund to join Meubel.

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