The €453m Dutch pension fund of IT company Unisys is thinking to join one of the six general pension funds (APFs) on offer by commercial players in the market.
In its annual report, the scheme’s board said to continue as an independent scheme would be “unrealistic”.
It cited the pension fund’s rapidly declining number of participants – 1,280 pensioners and just 285 active members – as a chief problem.
As a consequence, annual contributions represent a mere 1% of total pension assets, while administration costs per participant are no less than €529.
Because the pension fund must set aside 58% of its liabilities for its pensioners, its defensive investment policy still comes at the expense of pensions accrual for its younger participants.
The scheme also noted that the contract for pensions provision with Unisys was set to expire at the end of 2017.
In its annual report, it said it returned 0.36% on investments, due chiefly to a 3% return on its 30% return portfolio.
It lost, however, 0.63% on its matching portfolio, consisting for the most part of long-term government bonds.
As of the end of June, funding at the Unisys scheme, which granted active participants an indexation of 1.4%, stood at 102.6%.
Last year, the pension fund reduced its interest hedge from 70% to 60%, following its decision to introduce a dynamic cover with a range of 60-75%.
It pointed out that it uses the 20-year interest rate to set its hedging level.
The scheme’s board added that, following an asset-liability management study, it decided against adjusting its investment policy, “as the low funding and low interest rates complicated a proper balancing between the several investment portfolios”.
Last year, the Unisys pension fund invested €20m in residential mortgages at the expense of its holdings in long-term government bonds, and replaced one-third of its US high-yield credit with similar holdings in Europe.
It also increased its stake in infrastructure to 5.5% after deciding that the minimum allocation to any asset class should be at least 5%.