Dutch funds face 'non-core' rules
Dutch pension funds are facing restrictions to their non-core activities following comments by social security minister Mark Rutte.
ABP said the decision could cost it hundreds of millions of euros and lead to higher premiums.
“In the future pension funds will not in principle be able to perform activities which are not directly related to their core functions of managing money and paying pensions,” Rutte says.
The remarks support the recommendations of a report by the government-backed Staatsen Commission. Rutte said he had taken onboard comments from the labour foundation, the Stichting van de Arbeid. The regulations regarding secondary activities will be part of the pension act which is currently in preparation.
The report was published in November and has since undergone a two-month review period.
Rutte said it was important that secondary activities do not lead to financial dangers for participants and pensioners – and that pension funds do not gain a competitive advantage because of their position.
The largest Dutch fund, the E150 bn Stichting Pensioenfonds ABP, said the new restrictions could lead to higher premiums. And it said the measures could cost it “hundreds of millions”. “Eventually this could lead to higher premiums for employers and participants,” the fund said in a statement on its web site.
The Commission had proposed a 20% limit on Dutch pension funds’ investment in other companies. Beyond that point funds would have to notify the pension and insurance industry regulator, the Pensioen- & Verzekeringskamer.
The pension associations, the OPF and VB were both wary of the ideas at the time. “We say that’s not a good idea,” said Peter Borgdorff, director of the Dutch Association of Industry-wide Pension Funds, the Vereniging van Bedrijfstakpensioenfondsen. “We have a prudent person principle in investments, so why should they make it more difficult?”
The commission was set up by the first Balkenende cabinet and comprised Jos Staasten of Amsterdam-based consulting firm Boer & Croon, Allen & Overy partner Steven Schuit and PVK chairman Dirk Witteveen.
This all comes as a deal has been agreed by the social partners, under which the security level has been agreed at 97.5% and the recovery period fixed at 15 years.
In addition, a disclaimer clause on conditional indexation has been introduced such that if a pension fund uses a disclaimer, then it is not obligatory to have technical provision for it. On the other hand, if you don’t, funds will have to make reserves for it.
There has been a mixed response to the measure, with observers seeing positive and negative aspects. On the plus side, they welcomed the fact that “what is measured is managed” and that there is now transparency and political agreement. But conversely, there was a fear that the Netherlands’ ability to invest its large pension assets has been diminished. Another factor would be the likely growth in demand for longer duration fixed income instruments.