Dutch government may split up ABP and PGGM

NETHERLANDS – The two largest Dutch pension funds, ABP and PGGM, could be split up under new government proposals.

In a confidential report of the Dutch government the two largest pension funds have been asked to split their organisation up in a pension fund board and an executive department.

According to sources, the report will be presented to the Dutch parliament in the coming months as part of the new Pension Law. According to a spokesman of the Ministry of Social Affairs it is still a working document.

The reason behind the new proposal is the fear that, based on new EU directives, the strict compliance of companies to pay to the corporate pension funds, will not be able to be sustained in future.

The government wants now to split the tasks of a pension fund, so that all executive tasks of a fund will go to third parties. The main reason behind this is that the executive departments will start to compete with pension insurers and other players in the market. Increased competition should result in higher performance and cheaper pensions.

These ideas however have been met by harsh criticism from the main Dutch players.

Alfred Kool, spokesman for health care fund PGGM, said the scheme totally rejected the new ideas. He maintains the PGGM, and also other larger funds such as ABP, already have the necessary check and balances in place.

It was out of the question for the government to put ABP and PGGM in the same category as the smaller pension funds. The internal situation of PGGM, and ABP, was totally different from smaller pension funds at this moment. PGGM also already has an audit committee in place.

According to Kool, the government is again not up to date. Most proposals are already in place, without changing the normal structure of the pension fund. Also, Kool reiterated, PGGM is not at all convinced that there is a potential threat coming from Europe.

Kool stated that political ‘dogmatism’ should not start to rule a sector that is performing as the best in Europe. Divesture of activities or splitting up your organisation is currently not at all feasible. ABP declined to comment for this article.

According to Jan Kars, practice leader for retirement and financial management at Hewitt Nederland, the government’s proposals will have a potential danger in that it will not result in a positive reassessment of the pension sector but potentially could harm the overall Dutch “pension house”.

He said it seemed the government was largely focusing on risk containment instead of strengthening the sector and its players. The need to assess the possibilities of splitting up the tasks and activities of pension funds is not to be focused on ABP and PGGM, but is still more applicable for the smaller funds and corporate pension funds.

To split however the activities of these funds could result in a less positive attitude of the mother companies towards their own corporate pension funds.

At present, corporations can have their own views and image in the funds, there is still a largely social aspect in the governance of these particular funds. To hand over the activities of funds to third party or fully-fledged independent market players, which in practice should result in better services and yields, is not always preferable.

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