NETHERLANDS – Banking and insurance group SNS Reaal has made its pension fund independent. it is one of the first larger Dutch companies to do so.
The group announced that employees will be part of a collective defined contribution scheme. The company will only pay a fixed annual premium of 21.5%. The risks of investments and longevity will be with the members and the pension fund.
The deal is part of a new collective labour agreement with the trade unions. SNS Reaal has agreed to contribute €105m as a one-off payment to reduce a shortfall in the scheme’s reserves.
The divestment of its pension risks by SNS Reaal is seen as the start of a trend following the introduction of new accounting rules under which listed companies need to show the position of their pension schemes more clearly on their balance sheet. Consequently, the results will become more sensitive to financial market fluctuations.
“We have reluctantly agreed to this_step because SNS Reaal will be seriously affected by the volatility of the markets,” said Martijn Donker, negotiator of the CNV union. “Because the company won’t cut the pre-pension scheme and will allow its contribution to be used for the new ‘levensloop’ life_course scheme as well, and because of the small chance of underfunding, we have agreed. But we will remain very critical of other companies which are planning to get rid of the pension risks."
Patrick Banis of the FNV union sais that he considers the agreement as a "minimum standard for other companies".
“All AEX-listed companies have a policy of transferring the risks to the members when changing their pension schemes,” Dutch newspaper Het Financieele Dagblad quoted Bob Bunicich, pensions expert at consultant Mercers, as saying .
“In Holland almost 95% of employees are still within a defined benefit scheme, in which the company is liable to come-downs," he added. "Abroad it’s mainly the employees who are carrying the risks”.
If the unions' members agree, the decision will be backdated to 1 January 2005. According to SNS Reaal spokesman Ad Brits, the company board and the board of participants have already agreed to the change.