Sections

Mid-sized pension funds to 'disappear', former ABP director predicts

Related images

  • Amsterdam canal houses, Netherlands

Related Categories

Average-sized pension funds are destined to disappear in the Netherlands once the smaller ones have been liquidated, according to Ton Berendsen, former member of the executive board at the €309bn civil service scheme ABP and its provider APG.

Berendsen predicted only “a handful” of pension funds, including the state pension AOW, would remain, carrying out basic, mandatory pension arrangements.

In an interview in financial news daily FD, he argued that the Dutch pension system’s current problems could not be solved with minor improvements.

“The system must be changed to tackle problems such as the financing of the AOW, as well as the growing group of self-employed without a pension,” he said.

The current consolidation trend, with hundreds of smaller schemes throwing in the towel, is merely the start, he said. 

Berendsen, currently a senior partner at consultant Deloitte, said pension funds with less than €10bn in asset under management were unlikely to survive over the long term.

“In addition, pension providers that carry out the administration for less than 100,000 participants lack the scale to keep on investing in new systems,” he said. 

According to Berendsen, who was involved in the division of the old-style ABP into the current pension fund and its provider APG in 2008, small improvements in the system will merely increase complexity, thereby hindering proper governance at pension funds.

“We need to design a couple of basic pension plans, also accommodating the AOW, for the large sectors,” he said. “This way, the AOW could gradually be changed from pay-as-you-go to capital-funded, and would remain affordable despite the population ageing.”

Berendsen said he also expected that politics would take the initiative.

“The pensions sector is too busy implementing a deluge of new legislation,” he said. “Compare it with the review of the care system – that was also an initiave from politics. Although it took longer than one four-year term of Parliament, it has been completed.”

Berendsen recommended a basic scheme that would be mandatory for all working people.

“This would also serve the increasing number of self-employed, who are hardly accruing a pension,” he said.

“For earnings of more than 150% of the average income, people should take care of a pension themselves.”

The big advantage of a simple pension plan is that it is more sustainable than the current system, with its hundreds of different pension arrangements, Berendsen said.

“It would cause an enormous drop in costs,” he added. “In the current system, it is very difficult to cut costs further. It would be only possible with the large-scale introduction of standardised schemes.”

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2467

    Asset class: Search for a broker (mainly ETFs).
    Asset region: Global.
    Size: 250m.
    Closing date: 2018-08-28.

  • DS-2468

    Closing date: 2018-08-24.

  • QN-2469

    Asset class: All/Large Cap Equities.
    Asset region: Global Emerging Markets.
    Size: USD 500m.
    Closing date: 2018-09-04.

Begin Your Search Here