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Impact Investing

IPE special report May 2018

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FP Métal opens door for sector plans

When employers and trade unions in the Belgian metal industry came together in 1999 to discuss the formation of what was to become the Fonds de Pension Métal, it was the first time ever that a sector-wide plan had been contemplated to provide an occupation-related pension plan for a group of blue collar workers.
One major stumbling block to the creation of such a fund, however, was that everything was organised at the time on a company or plant level. Although the two sides saw advantages for both employers and employees on the tax side in running a single pension arrangement, there seemed to be no vehicle available to run an industry-wide or sector scheme.
Finally, however, an existing mutual benefit fund providing supplementary benefits in the event of illness and unemployment was identified that could provide a legal structure for the collection and investment of retirement contributions.
The result was a collective agreement covering the entire industry – around 160,000 employees working for up to 6,000 companies. This would be run on paritarian lines, with a joint committee of five employer and five union representatives.
Significantly, the approach of the metal industry became a blueprint for the new legislative framework to regulate sector pension funds in Belgium.
The metal pension fund’s first step was to introduce an asset liability management study conducted by Belgian consultant Conac, from which a robust software programme for the administration was developed.
While the fund is compulsory under the collective agreement, initially companies were given the choice to opt out if they could show they already had a pension scheme in place. Nonetheless, only around 50 firms did so.
The scheme is defined contribution (DC), with an individual account for each participant. The contribution is made by the employer only and started at 1% of pay in the first year, increasing to 1.25% in 2001 and to 1.5% in April 2002. In addition there was a ‘solidarity payment’ of e150 per member to the fund for unemployment and sickness. The fund has a guaranteed minimum return of 3.25% a year.
The fund’s investment was something both sides wanted to keep within the control of the joint committee, but with advice from three outside experts. Manager selection was organised by Brussels-based Pragma Consulting. Four managers were chosen, each with identical mandates. Following the ALM study, the fund opted to have the existing capital collected to be invested 60% in bonds and 40% in equities. However, for new money flowing in, 45% was allocated to bonds and 55% to equities. A new ALM study will be undertaken in 2003 to see if a different investment style is needed.
The fund’s annual income is growing and at end 2002 is expected to be around e150m, while the number of members covered has grown to 175,000.
Initially, there was not much interest from outside in what the metal pension fund was doing. That has changed. Other groups are now on the way to setting up sector plans.
Furthermore, the metal industry has now launched another sector fund for its white-collar workers.
In terms of administration for the new plan, the social partners decided to involve insurance companies and banks by asking how they saw the development of the scheme and their ideas for running it, including the costs and method of contribution collection. Between 10 and 15 groups were approached.
Brussels-based Integrale, which provides multi-employer arrangements, was selected for the mandate in February 2002. The rate of return guarantee for the plan will be 3.75%.
The collective agreement applies to employers who did not have a pension scheme in June 2001, so those with nothing for employees or part of their employees were included within the agreement. The contribution rate was fixed at 0.5% of individual salaries. All companies without any provision have three months up to this month to opt out and fix up something with an insurance company of their choice.
Companies with a scheme already must show that they contribute at least 0.5% to their scheme.

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