For consultants it has been business as usual in the Belgian pensions marketplace, where the advisory community is well developed compared to many other continental countries. The main turmoil has been among the investment management community, where virtually every local bank, apart from one or two notable exceptions, has been acquired.
This industry change can be seen as part of the ongoing consequences from the arrival of the euro area, which has brought local managers under pressure, as pension funds realign portfolios and look outside to more specialist managers.
Some of the smaller managers have responded by becoming more active about being included the search process which is a good development for the marketplace, says Brian Hill, responsible for the continental European investment practice of Watson Wyatt. From the pension fund side more interest is being shown in ALM studies. “We are seeing more activity in that area now,” he says.
As elsewhere, there is a trend in the Belgian market away from defined benefit(DB), but the market has a particular problem in relation to adopting defined contribution, as employers have to treat all members of a scheme in the same way.
This means that to give choices in schemes that will result in different benefits outcomes for members is not possible.
In these conditions, any moves from DB have not been mainly to DC, but to cash balance type arrangements. Hill says that the cash balance approach also fits in with the new rules requiring a guaranteed return annually over the lifetime of the contract. “But the employer retains some open ended liability and requires advice about this.”
There has been some moves towards setting up affiliation groups and industry-wide arrangements under the new legislation. “We have not seen much coming through here as yet,” Hill says. “Overall, the use of consultants is increasing as clients are becoming more aware they need advice, particularly with the greater number of managers active.”
This view is echoed by Koen de Ryck of Brussels-based Pragma Consulting. “Though the market here is small, it is definitely growing. We are seeing more and more local work coming to us, and it is becoming a greater proportion of our turnover.”
The new legislation is definitely driving part of this flow of business. “With the arrival of the industry-wide arrangements, we find they do need assistance and some hand-holding.” Because they are new to the scene and have no established structure, he feels they will need more advice, as they will be outsourcing much of what they do.
“We have seen growth coming through from the established pension funds in Belgium. In addition to manager selection, we have been involved in strategic asset allocation, and doing follow-ups on their existing managers, particularly with the more volatile markets we have currently.”
As to the outlook for the market, De Ryck has always regarded the Belgian market as being relatively sophisticated and outward looking, but he sees it undergoing substantial structural change with the new legislation in the next few years. “I think it is going to be a better market.” This being underpinned by greater understanding and support for what the pensions industry is trying to do from the politicians and the unions.