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IPE special report May 2018

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Watson critical of Star governance proposals

NETHERLANDS - Internal supervision of pension schemes, as proposed by the Labour Foundation, or Star, could more efficiently be done by the pensions regulator DNB, because of its independence and expertise, says consultancy Watson Wyatt Netherlands.

The proposed supervision by the Star seems to be a partly repeat of the accountant’s job, its pensions lawyer A.J. van de Griend added, in a comment on the foundation’s proposals for pension fund governance.

“The most workable internal alternative – especially for smaller pension funds – seems to be a visitation commission, of the certifying actuary, the accountant and the investment adviser,” he said.

Watson Wyatt doesn’t share the Star’s view, that proper internal supervision will lead to less external supervision. “At its best, it will be to the detriment of the scheme because of the fragmented approach,” Van de Griend responded.

Watson Wyatt is highly critical of the proposed ‘accountability body’, with representatives of employer(s), members and pensioners. Because of their natural differences of interest, a joint opinion on the board will be very unlikely, it argues.

According to the consultancy, the council of participants – made up of members and pensioners - of a pension fund is preferable for judging the board from their point of interest.

“The employer(s) have other means of checking the accountability of the board, e.g. via its agreements on financing and execution.”

“Accountability could also take place as part of a more clear and direct annual reporting. If it also states the received participants’ advise and the follow-up by the board, the picture will be complete,” Van de Griend explained.

Watson Wyatt doesn’t agree on the Star’s vision that participation and accountability can be integrated either, and that the council of participants can merge with its accountability body. “The council of participants must be able to stand for its own interests without employer’s interference.”

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