OPF warns of increased wind-ups prospect
NETHERLANDS - The government needs to speed up its plans for modernisation of the Dutch pension system, or it risks increasing the number of collective schemes moving into wind-up, according to the Foundation of Company Pensions Funds (OPF).
The government may need to consider a change in the Pensions Act if the new general pensions institution (API), currently in development, is not operational by next year, the OPF has suggested in a position paper.
In the organization's opinion, any change must allow company funds working together at scheme level, in order to enjoy the benefits of scale as soon as possible, as the new Pensions Act and accounting rules, the introduction of pension fund governance principles as well as the new expertise requirements are putting a lot of pressure on schemes, the OPF has argued.
"As a consequence, the number of company funds which wind up - 100 to 150 expected at present - could further rise," said the OPF.
As more companies should eventually be able to have their schemes run by an API, the OPF believes the vehicle could serve as a potential solution to much-needed co-operations between pension funds.
However, the API must allow individual schemes to ‘ringfence' their assets in order to make that possible, and the financial assessment framework FTK should only be applicable to Pensions Act schemes, it has suggested.
"Companies must also be able to keep the individual character of their scheme intact by being allowed to arrange pension fund governance and say through the contract, with the insurers' standards as a minimum," the OPF added.
According to OPF's director, Frans Prins, company schemes attach so much value to their own identity they would prefer not merge with the, usually much larger, industry-wide schemes.
Higher implementation costs may also prevent many company pension funds from placing their scheme with insurers, he further suggested.
If quick progress is hampered by the complexity of the API, the OPF stressed it would prefer to see the introduction of a ‘step-by-step' reform approach, starting with a creation of a framework for the most simple constructions.
A ‘Pensions Act route' must not only create the option of ring-fencing, but also allow cooperation between pension schemes of non-related companies, the OPF said.
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