The €21bn Dutch pension fund of electronics giant Philips said it wants to move its administration from PGGM to Blue Sky Group.

It said the two players had signed a declaration of intend to outsource both the administration and communication services for its 98,000 participants and pensioners as of 1 January 2021.

The pension scheme added that it expected negotiations to be completed soon.

Last year, the Philips Pensioenfonds announced it would seek a new provider, as it wanted to be optimally prepared, albeit “against reasonable costs”, for the changes that would come with a new pensions system.

The asset owner said it wanted a provider with a more flexible IT system with proven qualities.

A spokesman explained that the scheme’s search for the best IT system had been complicated, as several providers will replace their existing systems in the coming years.

“We wanted a system that is prepared for the future, has proven flexible qualities and offers a good price-quality ratio.”

In its annual report for 2018, Roel Wijmenga, the scheme’s chair, said he was worried about the expected costs of a transition to a new system with a degressive pensions accrual rather than the current average one.

He said he feared the pension fund would have to bear most of the costs – estimated at hundreds of millions of euros – of compensating older participants, who will be negatively affected by the change.

In 2016, the Philips Pensioenfonds replaced Aon Hewitt with PGGM as pensions provider. The change lead to a significant drop in administration costs.

The scheme reported costs per participant of €112 for 2018. Of total annual costs of €6.7m, €1.6m was attributed to the board and the pension fund’s administrative bureau.

The fund highlighted that the search for a new provider had not been triggered by below standard service or PGGM’s renewed focus on the care sector.

It declined to say how many providers had been involved in the selection process.

It said that consultancy Sprenkels & Verschuren, IT advisor IG&H and IT service management firm Quint Wellington Redwood had assisted in the selection process.

The Philips Pensioenfonds is to become Blue Sky Group’s largest client. At the moment, Blue Sky is the provider for 13 pension funds, including KLM’s schemes, with 87,000 participants and pensioners in total.

The scheme has outsourced its asset management to BlackRock since 2005. At the time, it left Merrill Lynch Investment Managers, which merged with BlackRock a year later. It said it is not considering switching asset managers.