The text of the new Dutch pension law is particularly vague about how pension funds that serve several different sectors should handle the question of whether or not to make the transition to the new defined contribution (DC) system or to grandfather accruals.
Pensioenfonds PGB, which administers pension arrangements for 16 different sectors and 250 individual companies, has signalled two major problems in the text of the law that was sent to parliament this spring.
Firstly, PGB noted that a pension fund is not allowed to decide independently whether or not it wants to make the transition to the new pension system. Instead, it has to wait for social partners to make a request to this end. However, this could turn problematic if social partners are no longer around, for example because a company no longer exists.
“In combination with the fact that grandfathering part of the accruals while transitioning the remainder to the new system is not allowed, does this mean that pension funds that encounter this problem cannot make the transition to the new pension system at all?,” PGB asked in an official response to a consultation on the new pension law that was opened by the government.
A similar situation could arise if social partners responsible only for one single arrangement decide they do not want to make the transition.
If other social partners do however support the switch to the new pension system, this produces a dilemma for the pension fund: it could decide to make the transition anyway, ignoring the wish of one set of social partners, or it does not, potentially ignoring the demands of the majority of the fund’s membership.
“Both of these situations seem extremely undesirable to us,” said PGB. The fund would like to see a change to the law enabling the transition of all pension funds’ capital to the new system if the majority of members and social partners would want this.
Reiniera van der Feltz, a trustee at financial sector scheme SBZ Pensioen, has asked similar questions as PGB. She said: “Theoretically, we could end up in a situation in which the transition doesn’t happen, even if 90% of our members want to make the transition.”
PNO Media, another multi-sector scheme for creative professions and the media, said it had been in touch about the topic “with funds that are in the same situation, including PGB.”
PGB has already suggested a solution to the transition conundrum to the government, which goes as follows: if a certain percentage of members agrees to the transition, a pension fund should be given the authority to decide to transition the entire fund to the new system.
“This way, it will be prevented that a large number of members and accruals would be grandfathered involuntarily,” according to PGB. If this solution were not acceptable to the government, PGB suggested to allow a binding decision on the transition by individual arrangement, effectively allowing part of a pension fund’s capital to be grandfathered.
SBZ’s Van der Feltz believes a pension fund’s board should be allowed to take the decision to make the transition independently. She noted a pension fund has a responsibility for both active and retired members.
“Under the proposed framework, social partners are put in charge of everything even though they only represent active members. Frankly, that’s quite strange,” she said.