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Pension schemes’ governance is lagging - DNB

NETHERLANDS - Many pension funds have underestimated the time needed to implement the principles of pension fund governance and a large majority have yet to organise their internal supervision, pensions supervisor De Nederlandsche Bank has warned.

So far, only one-third of the pension schemes are on track to meet the deadline of January 1 2008, said David van As, head supervision of large pension funds at DNB.

"Almost one-fifth of all schemes has not even responded to DNB's enquiries for progress made. They get a last chance to do so before they are invited for a supervisory meeting at DNB," Van As told IPE.

"The supervision on implementation of the governance principles will get a higher priority the less progress schemes have made. DNB's approach will be risk-based, and we will intervene if necessary," he added.

According to Van As, pension funds are finding recruiting the right people for the new requirements on internal supervision and the accountability body are the most pressing points.

Although it is mainly the smaller schemes which are having problems complying with the new PFG requirements, pension funds throughout the entire sector have fallen behind, the head of supervision made clear.

A visitation committee for their internal supervision is the solution of choice of approximately 90% of the schemes-on-track, of which a large majority favour a three-yearly check, DNB has found.

"The shape of the visitation committee is more pliable than the other options, such as a one-tier board or an audit committee," Van As comments. "That's why we assume that the pensions sector prefers to get some experience this way, and will move to more tailor-made solutions in the long-term."

"Moreover, there are already internal check mechanisms in place, like an internal accountancy."

In Van As' opinion, a three-yearly check is the minimum option for internal supervision.

"This will be highly taxing for the quality of the visitation," he said. "However, DNB will mainly test whether schemes stay within their own PFG framework."

A requirement for pension fund governance - mandatory from 2008 - was set by the previous social affairs minister Aart Jan de Geus. Since the sector prefers self-regulation, the present principles have been based on the recommendations of the Labour Foundation (STAR).

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