The pension fund of Aon Group Netherlands is considering placing its pensions in a Belgian IORP, it has indicated.
In a letter to its participants, dated mid-April, it explained that Aon had finished its contract for pensions provision with its pension fund, and transferred the pension accrual to a defined contribution plan with an insurer.
For the accrued pension rights under average and final salary plans, “a liquidation of our pension fund, including a collective value transfer, is the most realistic scenario”, the scheme said in its letter.
According to the pension fund, the employer has made clear it would prefer a transfer to an IORP in Belgium.
“This alternative is included in our investigation, as it seems to offer benefits to all parties involved,” it said.
The IORP could also house pension rights from Aon staff in Belgium and possibly other European countries.
Speaking to financial daily FD, René Mandos, chairman of the Aon scheme, said it had already concluded that the Belgian option was the most beneficial for the scheme’s participants.
“The financial requirements in Belgium are different, resulting in less risk of a funding shortfall,” Mandos said, adding that the likelihood of indexation would also be greater than placing the pension rights with a Dutch insurer.
In his opinion, the pensions would be properly secured in Belgium, as the employer must plug a funding shortfall.
According to the chairman, no decisions have been taken, nor has the company filed for value transfer.
However, there are discussions with both the Dutch supervisor DNB and the regulator in Belgium, he said.
A decision is due before 1 July.
Although moving to Belgium has been discussed by Dutch pension funds since 2007, relatively few employers have developed concrete plans to date.
In 2011, the tiny Pensioenfonds Lugtigheid moved south, followed by the pension funds of clearinghouse Euroclear and contact lens manufacturer Alcon.
The pension fund of pharmacy Johnson & Johnson is developing plans to do so.
However, according to Andrew Davies of pensions adviser Towers Watson, at least 10 Dutch pension funds, including two €1bn schemes, are gearing up for similar moves due to increasing regulatory pressure in the Netherlands.
Cost is also a contributing factor, due to Belgium’s VAT exemption, as well as lower supervisory costs.
Meanwhile, Jeroen Dijsselbloem, the Dutch Treasurer, has criticised any move by a pension fund to avoid Dutch supervision and regulation “irresponsible”.
“If this is the reason, it seems to me this will make the schemes’ participants very vulnerable,” he said.