Dutch insurer ASR wants to phase out defined benefit (DB) contracts with large employers and will only extend them if clients plan to switch to defined contribution (DC) arrangements in the near future.

Clients wanting to extend DB contracts would also have to meet strict financial criteria, ASR said in its annual report.

The insurer said it was in the process of reducing the complexity of its existing pensions portfolio as well as phasing out complex products. These included employers’ DB contracts for separate accounts, comprising pooled investments as well as the employer’s say in the investment policy, ASR explained.

The contracts often come with guarantees and profit sharing if certain investment results are achieved.

ASR said it moved most of its DC products to a single platform last year, adding that it had improved its DC proposition for workers by adjusting life-cycle strategies and fund selection, making participant portals more user-friendly as well as improving its customer service. 

Last year, ASR saw assets under management at its general pension fund (Het Nederlandse Pensioenfonds) increase to €1.3bn, making it the third-largest general scheme (APF) on the Dutch market.

Recent new schemes for ASR’s APF included those of theme park De Efteling, insurer DAS, engineering firm Arcadis and the Association of Commercial Pilots (Verkeersvliegers).

Last year, ASR Asset Management increased its assets under management by €1.8bn to €55bn, largely due to tailor-made mandates for pension funds and its acquisition of First Investments. The addition of First Investment’s team would improve ASR AM’s ability to offer pension funds matching and return-seeking solutions, the company said.

The asset manager said it had excluded from its investment universe companies that generated more than one-third of their income from tar sands and shale oil, and would no longer invest in countries that scored less than 50 on the Environmental Performance Index.

Parliament critical about proposals for industry scheme mergers

The Dutch Parliament has been very critical about a proposed bill that would enable mandatory industry-wide pension funds to merge.

Although the lower house welcomed additional options for consolidation in the pensions sector, it said the proposed legislation was the wrong instrument to use because of the stringent conditions attached to a merger. The proposals would allow schemes to temporarily keep their assets ringfenced if their coverage ratio differed too much.

Several political parties linked their criticism to objections voiced by the pensions sector.

Last October, the Pensions Federation even asked the cabinet to withdraw the bill because of the multitude of constraints set for scheme mergers.

It cited the condition that merger partners with assets above a certain level would be excluded, limiting the options for small pension funds to join larger ones. 

It also indicated that the proposed solutions for bridging funding differences between merging schemes and letting participants benefit from increased scale were not workable.

The Christian Democrat party, part of the ruling Dutch government coalition, also suggested the government withdrew its bill, while Labour Party PvdA made clear it doubted the cabinet’s claim that 10 mergers between sector schemes were expected.

Green-left party GroenLinks said it feared that the number of conditions would prevent schemes achieving benefits of scale.

Parties also wanted to know why the government had set maximum assets of €25bn for a merging scheme, and why no more than five sector pension funds should be allowed to merge.

In order to speed up things, the previous government – which drew up the bill – had skipped the usual round of consultations with the stakeholders.

Minister: Pension funds could boost investments in local listed firms

Dutch pension funds can increase their investments in local listed companies, according to Eric Wiebes, minister for economic affairs, but they don’t see a specific role for themselves in protecting Dutch companies.

As a consequence, no measures were necessary to increase the attractiveness of taking a larger stake in Dutch firms, the minister concluded.

Wiebes said that, during the consultation, investors had referred to their fiduciary duty towards generating returns with an open eye for risks.

And although the investors conceded that political risks in the Netherlands were low, they had also said that it was very difficult to gauge political risks, according to the minister.

He noted that pension funds in particular had increased their focus on impact investments.

As a result, they had already taken substantial – and often more actively managed – stakes in Dutch companies, and were also more actively promoting their own policy, Wiebes pointed out.

The ministers conducted the consultation in the context of social and public stakes involved with hostile take-over bids for large Dutch companies, including AkzoNobel, Unilever and KPN.