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There is no pensions crisis. That is the assertion of new VB chairman Benne van Popta. “New schemes are still being established. And it’s very questionable that youngsters aren’t interested in solidarity and collectivity. A recent survey among 3,000 young people has shown that three-quarters of them want to save for their pension together with their employer.”
Van Popta is convinced of the viability of the very thing his organisation is standing for. “Youngsters haven’t said goodbye to solidarity,” he stressed during the celebratory meeting in the Hague. “But we need to actively raise pension awareness among them, and develop ways of communicating in order to end the diffuse debate between the generations, which sows mistrust”.
There was more good news. Van Popta welcomed five new VB members, which brings the total number of associated pension funds to 88 – more then 95% of all Dutch industry-wide schemes. On average they have been able to improve their combined assets by e40bn to e358bn, due to returns on investments of 10.5% in 2004. The average coverage ratio has risen from 111.5% to 118%.
On the other hand, 2005 will be characterised by rising premiums – often above cost-covering levels – and discounted indexation, the chairman said. “But by sharing the risks between all parties the pain will be limited and the system will prove its strength,” he said.
In front of the representatives of VB’s member schemes, Van Popta called on the politicians in the audience to develop an integral long-term vision on pensions. “If the legislation keeps on changing, members can’t make a proper judgement.” The chairman, however, wants long-term policy still to be based on the three pillars of the present system: the mix of capital funding and pay-as-you-go funding;, the mix of individuality and collectivity; and the mix of voluntarily choices and mandatory participation.
Van Popta criticised the complexity of the present government proposals on Vut, prepension and ‘levensloop’, and the sluggish way that these are being issued. “It’s almost impossible to deal with and it’s frustrating the debate about the collective labour agreements. Not much has been done with our comments, but it has become clear the new legislation will lead to higher administrative costs. To me it’s still unclear why these long-term measures need to be introduced at such high speed. The politicians shouldn’t think too lightly about the problems of implementation.”
As far as the proposals for the new financial assessment framework, or FTK, are concerned, VB’s chairman urged for a balance between risks management and yields. “If we go too far in risk limiting, we can be assured of an eventual meagre
pension,” he warned. “In the future the indexation will mainly be financed from the output, instead of the contributions.”
Van Popta said he is expecting clarity soon about one of the key parts of the FTK: the ratio between index targets, method of financing and the communication of both. “We should be apprehensive of using our traditional methods of communication against the criteria of tomorrow. This will affect the flexibility of the pension funds to the core. Moreover, it might lead to the safety of promising less, while the members expect realistic promises. The parties involved should thoroughly screen for unmeant and unforseen effects during the transition period”.

Guus Boender, Ortec partner and professor of asset liability management at Amsterdam’s Vrije Universiteit, also focused on transparency of the implementation of the FTK rules. “The pensions industry must get the regulator to agree that a minimum coverage ratio of 105% should also be feasible during exceptional circumstances. Because, what to do if a drop in market rates causes a coverage ratio of 95%? A mandatory restoration within a year as proposed, will require e50bn, which will cause the national economy to implode.”
Boender called for rules that take into account the difference between strong funds with many young members, like healthcare scheme PGGM, and funds of companies with a near-junk-bond status. In his vision pension schemes should have certified internal risk models which, for example, set limits to short-term investments.
Pension funds can’t afford only fixed interest investments, added Boender to the debate. “The yields of equity are vital for keeping everybody’s pensions at the same level.”
After explaining and praising the strength of the Dutch pensions system, Erik Lutjens, professor pensions law at the Vrije Universiteit, noted some areas that could be improved. He mentioned the expertise within the boards of pension schemes, their independence, openness and internal supervisory structures. He invited them to ‘open their windows’.

The pensions lawyer, however, doubted whether an independent organisation for corporate governance was necessary at the moment. “Such a body will only be relevant if its position towards the pensions regulator is being discussed.”
Lutjens warned against overregulation and uncoordinated regulation. “The government should stop issuing new legislation,” he urged. “Don’t change the rules while the match is still on. And don’t just parachute an internal supervisor within the pension funds.”
His remarks caused a spontaneous debate within the audience. “There must be consistency in the ratio between liabilities and investments. The policy should be based on this,” stated a representative of the pensions regulator DNB. “The requirement of a repair within a year if the coverage ratio is less than 105% is extreme,” responded a VB member. “Such a demand has been set in only two of the 24 EU member states.”
Professor Lutjens was apprehensive of supervisory rules set by the EU as well. He described the proposals as ‘dumping of supervision’. Referring to the impending EU directive, he said: “It’s very undesirable that Greek pension funds in Holland will have to stick to the rules of the Greek regulator. The EU should block this.”
Wouter Gortzak, secretary/treasurer of the largest trade union FNV, stressed the value of solidarity within the Dutch pensions system. According to him there is still solidarity, but it needs to be better explained. Gortzak called the delayed taxation system “a fantastic mechanism of solidarity between the generations”.
According to Gortzak, better results from individual arrangements instead of a collective scheme is a myth. “Individual schemes charge at least 30% costs, while the pension funds can keep their expenses at approximately 7%.”
Several politicians joined the debate and gave their views at VB’s meeting. “Retirement should be made mandatory for over 65s, and it should be made very clear why,” stated Pieter Omtzigt, pension’s spokesman for the Christian Democrats. “Pension funds are now so important that they have a stake in the national economy. In which assets are they supposed to invest, if there isn’t a national debt?” he asked rhetorically. “Pension funds are now the organisations with the largest assets in the country.”
Jan Paternotte, chairman of the youth organisation of the liberal democrats, pleaded for a study into who should pay what. “Youngsters increasingly need their individually saved pension. To them security
is more important than transparency,” he said. Paternotte
predicted that one-third of the Dutch population will be over 50
in 50 years’ time, which he called a
‘disaster’. “Labour participation
by people of over 60 in the US
and Japan is much higher,” he
said, pointing to the looming
discrepancy.
Liberal spokeswoman Bibi de Vries showed a much more relaxed attitude towards the pensions system. “Why should we make an already sound system mandatory?” she asked. Chairman Van Popta’s resolute reply was: “Mandatory participation isn’t a toy of the social partners. It is the reason why we have a cheap pensions system which allows most of the employees to building-up a pension.”

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