NETHERLANDS – Companies in the Netherlands are too quick to push through closures of their pension funds, accountants at KPMG have said.

In the 2001-2004 period, some 200 Dutch funds were wound up, mainly as a result of higher costs, new regulatory requirements and accounting standards and changes in pre-pension and life style savings schemes.

In a statement, KPMG says most companies are “too focused” on the cost-side of closing down a pension fund, instead of looking at why they had a pension fund in the first place.

“The most important reason behind companies wanting to have a pension fund, is that they want to be fully in charge of all the details, such as quality, risk and costs,” says Geert van Til, partner at KPMG Financial Services. However, Van Til stresses, the downside of running a pension fund is that a company is much more vulnerable to risk, such as fluctuations on the stock market, and changes in the law.

KPMG says risk aspects make up an important part of the decision to close down a pension fund. “Too few companies realise winding down a fund is irreversible. It means the in-depth knowledge on pensions disappears.

“By transferring a pension fund to an insurer or an industry-wide fund, the company will lose all its influence on the quality of the plan and the costs. As a result, it will no longer be able to distinguish itself from its competitors.”

KPMG advises companies and their pension fund boards to determine what demands they have of a pension plan. “This should be the starting point of the decision-making process to close down a fund or not. Our experience teaches us it is good to re-assess these demands every three years.”

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