NETHERLANDS - The new pension vehicle Premium Pension Institution (PPI) is going to have a considerable impact on the whole market for defined contribution plans in the Netherlands, experts have predicted.
Tim Burggraaf, European partner at Mercer, said: "As the most important providers of DC products, insurers in particular will be affected."
The PPI has been introduced as a low-cost and transparent pension vehicle that can operate cross-border under the Institutions for Occupational Retirement Provision (IORP) directive.
According to Burggraaf, his company - a consultant on investment and retirement services - is aware of at least 32 parties that are preparing a PPI.
"Among them are several foreign asset managers that are keen to offer their products," he told IPE.
He claimed that supervisor De Nederlandsche Bank (DNB) has received at least 100 applications for a licence.
However, Burggraaf said he questioned whether all applications would lead to an operational PPI, "as an effective PPI requires benefits of scale".
He stressed that Mercer did not have plans for running a PPI and was just acting as an adviser on establishing such a pension vehicle.
Insurer Aegon and asset manager Robeco have already worked out plans for a PPI.
Be Frank - a co-operation between BinckBank and insurer Delta Lloyd - wants to enter the market as soon as possible, as does the joint venture between insurers Brand New Day and ASR Netherlands.
However, a spokesman for the DNB said no permits had been granted yet.
"Although we have received many informal inquiries about the PPI, we are assessing no more than a dozen concrete applications currently," he added.
Jacqueline Lommen, senior consultant on European pensions at Aon Hewitt, said: "A PPI can operate cheaper because it is a lean and mean vehicle, which is not allowed to offer guarantees and therefore doesn't carry risks.
"As a PPI is only allowed to carry out DC schemes, it can operate with less legal requirements, such as pension fund governance, or the financial assessment framework FTK, with its requirements for reporting and financial buffers."
She noted that, in addition to financial service providers, pension funds were also transforming themselves into a PPI.
"In particular, pension funds of internationally operating companies that often have DC plans are interested in the PPI," Lommen said.
According to the consultant, it is hard to say whether the PPI can operate more cost-effectively than traditional DC arrangements.
"That depends largely on the implementation model, as well as on how effective a PPI provider has set up his organisation," she said.