ABN AMRO Pensioenfonds
• Invested assets: €9bn
• Members: 80,000
• DB scheme
• Date established: 1907
• Funding ratio: 117% (March 2010)
Good governance is a necessary condition of running a pension fund well. Dutch law prescribes a set of governance rules with which to comply.
The law requires accounting of the entitlement beneficiary, pension beneficiaries and the employer. An accountability body for pension funds is appointed for this purpose, as well as internal supervision, which undertakes independent checks every three years.
We have set up internal supervision by means of a committee made up of three external experts, which reports annually on the way in which the board manages the pension fund.
Dutch law requires half of our 10 pension fund board members to be appointed by the employer and the other half to be made up of employees and pensioners. We have three board members that are selected by a participants’ council made up of employees and pensioners and two board members of retirement age who have been elected by pensioners.
The pension fund board meets on average once every six weeks, but it convenes more often if required.
The committee for internal supervision reports to the board and to the accounting body once a year. They also report on the pension fund’s annual report.
The newer elements in our governance structure - which we integrated three years ago - are a result of pension fund law. One of them is the internal supervision mentioned earlier, and the other one is the accountability body.
What differentiates our pension fund from many others is our participant’s council. It has the right to advise, as prescribed by law, but can also for example, endorse the annual report, which is prepared by the board of trustees. Other Dutch pension funds also do not necessarily involve pensioners, either in the council or the board of trustees.
We have no plans to change our governance structure at the moment. But if there are any amendments to pensions law we will change our governance structure accordingly.
Bjarne Graven Larsen
• Invested assets: DKK420bn (€56.4bn)
• Danish labour market supplementary pension
• DC scheme
• Date established: 1964
In some ways our governance is very straightforward; in others it is unique. We are regulated by the same legislation as Danish insurance companies because - Solvency regulation aside - in Denmark there is no difference between regulation for insurance companies and pension funds.
But in terms of how the board is elected, we have our own legislation stating that employee and employer organisations have to appoint six members each, who then work together to select an independent chairman.
The board meets at least five times a year. But there is also a chairmanship, comprising an independent chairman and two vice-chairmen, which convenes every month. The two vice-chairmen are members of the board, who historically have been leaders from the employers’ and the employees’ side, for example, the chairman of the nationwide labour union and the chairman of the Danish employer’s organisation.
The chairmanship also has an audit committee that meets at least four times a year. The number and length of meetings has increased with the audit committee introduced by ATP a year ago - new legislation came into force, which required public companies in the financial sector to have an audit committee. Although legally we did not need to have one, as a complex financial institution we opted for one in order to set up the best possible governance controls.
The audit committee consists of three board members who, because of their specific skills and experience of audits and reporting, are the same as the ones in the chairmanship. Their role is to get a deeper insight into the processes behind the risk reporting and the annual reports.
Currently, we are discussing how the new Solvency II rules will affect the regulation of pension funds and insurance companies. We have already decided that even though the set of rules does not apply to ATP directly, we want to behave as if they do. In other words, we are in the process of preparing for the implementation of Solvency II within ATP.
In the future, it will shift responsibility from the administration to the board; so the board will be even more involved in the risk management set-up. It will decide how we should deal with different risks and what kind of model we should use to monitor our risk.
CERN Pension Fund
• Invested assets: CHF3.9bn (€2.8bn, Nov 09)
• Members: 3,100 active, 3,200 retirees
• DB scheme
• Date established: 1955
• Funding level: 69.5% (Dec 09)
The governance structure of the pension fund of the European Organisation for Nuclear Research (CERN) was revised in 2007 following a thorough best-practice study. The aim was to align the governance of the pension fund with international best practice by establishing a fund governing board pension (PFGB) that reports directly to the CERN Council, and an independent fund management unit led by a chief executive officer who is also appointed by the CERN Council. Thus, the new structure guarantees the independence of the management of the pension fund.
Previously, the pension fund was led by an administrator from the HR department. The new governance structure was implemented in 2008 and the formal rewriting of the pension fund rules to reflect the new structure is complete.
Under the new governance structure the pension fund is managed by two bodies: the PFGB and the CEO. The PFGB is a subsidiary body of the CERN Council, which effectively is the equivalent of the board of directors of CERN. The CERN Council includes representatives of all 20-member countries and directly appoints the chief executive of the fund on recommendation of the governing board.
CERN Pension Fund also covers the employees of the Munich-based European Organisation for Astronomical Research in the Southern Hemisphere (ESO), with each organisation guaranteeing the benefits acquired under the system. And so the composition of the governing board is set by statute with specific representatives from different stakeholders.
Its 10 members include two representatives of CERN member states, one representative of an ESO member state, one representative of CERN management, two representatives of the CERN staff association, one representative of the ESO staff association, one representative of the retirees and two outside experts.
The two external experts are appointed by the CERN Council on recommendation of the other PFGB members. Currently, these are Jacques-André Schneider, Switzerland’s leading pension fund governance expert, and Richard Balfe, chairman of the European Parliament Members Pension Fund.
The PFGB meets six or seven times a year, while the Council meets four times. Council meetings typically include an update of pension fund activities by the chairman of the pension fund governing board, often with the chief executive
assisting as needed.