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Diary of an Investor: Project Waffle

For some months now, the powers that be here at Wasserdicht headquarters have been looking at moving our Dutch pension fund over the border to Belgium.

This has involved an ongoing feasibility assessment and discussions with the regulators and our stakeholders. Pension funds in other European countries are also involved as we may pool them all together in the same country.

At first the unions were against it but they have come round, and the trustee board has now given the green light for the next stage of the process. This is now a live project, with milestones, deliverables and deadlines, although some of the deadlines are definitely not set in stone. Someone with a sense of humour has christened it ‘Project Waffle’.

At around the same time, the EU concluded discussions on a new occupational pensions directive, IORP II. We need to get up to speed.

So we have a conference call with Willem, our lawyer in Amsterdam, to discuss the implications of the new directive. Rolf, the chairman of trustees is on the call, together with one of the project consultants, the designated project leads from the Wasserdicht HR and finance functions and our other European pension heads, Clive in London and Hans in Frankfurt.

‘The new IORP II Directive has made a compromise on cross-border entities,’ says the lawyer. ‘Cross-border entities must be funded at all times but the text of the directive recognises that this may not always be the case.’

‘Masterful,’ opines Rolf. ‘A classic European compromise given the points of view of the British and the Dutch on this question. Let us say, some of our entities’ pension funds are not fully funded at the moment.’

The Wasserdicht Nederland pension scheme is well funded, thanks to the prudent strategy of the trustees, but this is not the case for our UK pension fund, or the US one. ‘Underfunded?’ chimes in Clive. ‘Guilty as charged!.’

‘There may be ways around the full funding question anyway, in our opinion,’ Willem continues. ‘Given that funding is a process that goes on into the future and pension liabilities defease over many decades, we believe that an underfunded pension scheme with an adequate recovery plan should be treated as fully funded under the provisions of IORP II.

‘Will the regulator accept this?’ I ask?

‘A good question,’ Willem answers. ‘Under the directive, if the two regulators involved do not agree about a proposed cross-border transfer there is a mediation process involving EIOPA in Frankfurt, but its views are not binding.

‘Brexit adds an interesting dimension to the equation,’ says Willem.

‘Perhaps we should turn to our British colleague,’ Rolf says.

‘Ah well. Our new prime minister says Brexit means Brexit,’ Clive says. ‘But in reality no-one knows what this means. I’d say it might be wise to count us out of the pooling situation for the moment.’

Pieter Mullen is investment director at Wasserdicht Pension Funds

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