The Dutch pension fund of US company Dow Chemical is aiming to conclude a buyout deal and is currently investigating the first quotes it has received from insurers. If the outcome is positive, the fund intends to submit an application to regulator DNB for a collective value transfer before the end of this year.
According to Ed d’Hooghe, chair of the board of the pension fund and HR director of Dow, requests for proposal have been submitted to all five insurers that are active in the Dutch buyout market.
However, not all of them are currently interested in a possible buyout of the defined benefit (DB) pension fund Dow, says d’Hooghe.
This is likely the case because the Dow fund is too big for them to absorb, d’Hooghe suspects. “With assets of about €2bn, we are a rather large fund. It’s not a given that we fit into their planning.”
Sufficient quotes
However, there are “enough quotes left for us to be able to make choices”, added D’Hooghe, who is now conducting a “preliminary investigation” of the offers that have been received, with the help of consultancy WTW.
“If the outcome of this is positive, we want to try to submit the application for a collective value transfer to DNB before the end of this year,” he continued.
Contribution discount
Despite an investment return of 4.03%, the current funding ratio of the Dow scheme fell from 118.4% to 113.1% in 2024.
The decrease was partly due to a contribution discount (worth €36.6m) and on top of this, a contribution refund of almost €66m to employer Dow Chemical, based on the fund’s funding ratio at the end of 2023.
In 2023, more than €85m had already been returned to Dow, bringing the total cashback for the firm to €188m, or almost 10% of the fund’s assets.
The company was entitled to the refunds because the pension fund’s funding ratio was more than 10 percentage points above the minimum level required by regulator DNB.
In the case of a buyout not materialising, the “financially very healthy” pension fund (see box) can continue independently for “decades to come”, according to d’Hooghe. “The fund will, in this case, continue in its current form,” he added.
As of 1 January 2028, all employees will start to accrue pensions in a new defined contribution (DC) arrangement with an as yet unknown pension provider. Since 2014, new employees have been in a DC arrangement, which is executed by United Pensions in Belgium.
At the turn of the year, social partners decided not to convert DB accruals to DC capitals – a decision that was explained in the fund’s transition plan, which was described by the Dow Pensioners Association (VDG) as “very brief and incomplete” and “unilaterally focused on the interests of the employer”.
“We spoke to DNB about this by telephone on 8 May, but they aren’t doing anything about it, although they felt that the transition plan was very poorly drafted,” said Dik Schipper, chair of the association, which has approximately 1,500 members out of 3,000 pensioners.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra.
