Dutch food supply scheme to transfer to multi-sector fund, cuts inevitable

The Dutch industry-wide scheme for the agricultural and food supply trade AVH is to transfer to multi-sectoral pension fund PGB from next year, with AVH pensions expected to be lowered by 10% as a consequence of the difference in the schemes’ coverage ratios. 

On its website, AVH – which has nearly 22,000 active members and over 9,900 pensioners – said that due to the difficult financial situation the board decided at the end of August to move both the accrued pensions and future rights to PGB.

At the end of September AVH’s policy funding ratio was 93.1% and that of PGB 104.1%. The exact level of cuts will depend on the pension funds’ position at the end of this year. The current coverage ratio of AVH is 90.9%. The policy funding ratio is the average of the funding ratios over the past 12 months. 

AVH’s trustees stated that even if the fund had remained independent pensions would have had to be lowered, by the end of this year or next year, depending on the coverage ratio.

AVH, which manages €1.4 billion in assets, was in a difficult position on many fronts. The scheme, with more than 900 affiliated employers, had transferred its pension administration to AGH – a small provider that got into trouble and had to borrow money from its customers to prevent liquidity problems. 

In addition, AVH had outsourced its fiduciary management to Robeco, which at the end of last month announced it would discontinue its fiduciary services for pension funds after the departure of its largest customer, the industry-wide pension for transport. AVH was one of four remaining customers and had to look for another fiduciary manager.

In a letter to scheme members at the end of September, the AVH board said the transition to PGB was not yet a done deal. First of all, the Dutch pensions watchdog DNB has to give permission for the collective transfer. The administrative process at PGB also has to be completed.

“The transition date of 1 January 2020 is still uncertain,” said vice-chairman Arjan Hess and chairman Daan Muusers. “If this date isn’t feasible, the transfer to pension fund PGB will happen at a later time”.