The Dutch pension fund for bakers (Bakkers Pensioenfonds) and the sector fund for the confectionary industry (Pensioen Zoetwaren) have announced a merger, creating a €8bn scheme, which is also open for other pension funds in the food industry to join.

The two funds have been cooperating since 2014, as they share the same fiduciary manager – NN Investment Partners – and TKP as administrator. However, a merger had thus far been prevented by the large difference in funding ratios between the two funds.

The €4.8bn Bakkers fund currently has a funding ratio of 93%, which is 10 percentage points lower than Zoetwaren’s 103%. As funding ratios will disappear with the upcoming switch to a defined contribution (DC)-based pension system, the main barrier for a merger will soon be out of the way.

Social partners in both sectors are currently working on the details of the merger, which the funds expect to complete by 1 January 2024. The two funds will first separately make the transition to the new pensions contract. Once this is completed, the actual merger will take place.

Despite the two funds planning a merger, the two separate sectors will retain some freedom to negotiate their own pension arrangements. Most notably, pension contributions between the two sectors may differ.

Food fund

The new pension fund, to be called Pensioenfonds Voeding or Food Fund, will have assets under management of close to €8bn and almost 200,000 participants, three quarters of which originate from the Bakkers scheme.

The two schemes are actively inviting other related funds to join the merged scheme, which will still not be large enough to sustain itself in the long term, acknowledged Peter Mannaert, director of Bakkers. The fund is therefore open to other funds in the food and food distribution sectors. “Our definition of this is: everything that can be eaten,” said Mannaert.

Possible candidates include the funds for butchers (Slagers), meat industry (VLEP), the fund for the dairy industry (Zuivel) and the €7bn grocers’ fund (Levensmiddelenhandel). The farmers’ fund (BLP) “cannot be excluded on the long term” either, noted Mannaert.

The total pension fund market that falls within Mannaert’s self-defined remit amounts to some €30bn. “But this includes company pension funds that will prefer to remain independent such as Ahold and Heineken,” he said. “If you just look at the funds that will need to take some kind of action to remain viable, the potential growth in assets is around €10bn.”

These potential joining funds would benefit from economies of scale as the food industry is quite a “homogeneous” sector which would enable the new scheme to tailor its services to the needs of its population.

“In our sector margins are thin and the participants tend to have relatively low levels of education. We can take this into account by keeping things simple in our administration and communication,” Mannaert said.

Mannaert believes this homogeneity makes it possible to provide a pension at a lower cost than multi-sector competitors such as PGB. It’s also more practical for funds to remain organised along sector lines, he added.

After all, most people who change jobs remain in the same sector so their pensions would not need to be transferred to another pension fund in this case.

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