Dutch merchant bank NIBC is looking to place its €323m pension fund with a consolidation vehicle (APF) or joining an industry-wide scheme in the next few months.
In a newsletter to its participants, the pension fund said change was needed in order to improve the scheme’s prospects for the medium term.
It indicated that a committee, comprising representatives of the employer, the pension fund as well as its participants, had already concluded that the current model for pensions provision was not up to the challenges the scheme is facing.
It said continuing low interest rates, additional legal requirements and the development of a new pensions system triggered the plan.
The pension fund, with 570 active participants, is also struggling with relatively high costs for pensions provision, which amounted to €783 per participant last year.
It stated that filling in board vacancies with the company’s staff was also posing a problem.
At the end of October, the coverage ratio of NIBC’s pension fund stood at 99.9%, which is lower than most Dutch pension funds of banks and financial institutions.
LCP: Dutch schemes return 4.9% in third quarter
Dutch pension funds have achieved a return on investments of 4.9% on average during the third quarter, with smaller schemes usually performing better, according to consultancy LCP.
The firm, which based its estimate on quarterly data of individual pension funds published by supervisor De Nederlandsche Bank (DNB), said its figures reflected a weighted average.
The unweighted average stood at 6.1%, implying that larger schemes had usually generated a lower result, it said.
LCP’s figures included pension funds’ results of the interest risk on liabilities. Large pension funds usually have a lower interest cover.
The consultancy noted that, despite positive returns during the first three quarters, pension funds’ coverage ratio had continued to decline, with the weighted average decreasing to 103.4% at the end of September.
It attributed the funding drop in particular to decreasing interest rates, which reached their lowest point in August.
LCP added that the weighted cumulative return for the first three quarters was 16%.
At the end of September, funding for most Dutch schemes ranged from 105-110%, with 39 pension funds short of 100%.
The consultancy also said the coverage ratio of pension funds with relatively small securities holdings and a high interest hedge was least affected.
Most Dutch pension funds have invested approximately 50% of their assets in securities and have covered 50% of their interest risk.