The Dutch industry-wide pension fund for butchers is fighting an admonition by the De Nederlandsche Bank (DNB) regarding its arrangement for early retirement (VPL).

DNB, the pension sector’s regulator, has refused to withdraw the admonition despite clarifications offered by the pension scheme, leaving it no other option than to take the regulator to court, according to John Klijn, employee representative and trustee board chairman.

The €2bn butchers scheme reported on its conflict with DNB in its annual report. The decision to bring the case before a judge was made in May. The case will go to court on October 13 in Rotterdam.

Klijn told IPE’s sister publication, Pensioen Pro: “In essence, DNB is of the opinion that we are using pension funding to fund VPL-related liabilities, whereas we, on the other hand, firmly believe we have worked out a very well balanced arrangement.”

In 2006 and 2007 many Dutch pension funds made arrangements to gradually phase out early retirement schemes, for instance by raising pension rights to allow certain groups of participants to continue to take early retirement. In 2012 DNB reviewed these types of arrangements and concluded that in many cases the demarcation between VPL funding and pension funding was less than clear.

“We could have fully financed the VPL scheme back in 2007, considering that our pension fund boasted a funding rate of 160%,” Klijn said. “We opted not to do that, as this was a conditional scheme: only plan participants who continue to work in this industry could apply for this early retirement pension.

“But if we had opted to fully fund the scheme in 2007, everything would be just fine today.”

The butchers scheme decided to secure the VPL rights in three tranches. “We opted for a careful and well-balanced method,” says Klijn. “The first tranche was fixed in 2011, the subsequent tranches were to follow in 2016 and 2021. On the advice of our accountant, we took this on the books as a liability.”

In 2013, DNB objected. According to the supervisor, the butchers scheme is allocating pension funding to VPL objectives: DNB views funding added to the VPL buffers as illegitimate, fictitious contribution cuts.

“Initially DNB disputed €40 mln,” Klijn said. “After we offered an explanation, the amount was lowered to €10m. We have held three separate discussions with DNB to clarify our views and we have submitted all manner of figures.

“In addition, we have used minutes of meetings to demonstrate that we had done exactly what the social partners had instructed the pension fund to do.”

The DNB is nevertheless standing by the admonition – which has now been suspended until the judge has ruled on the case. If the court rules against the pension fund, it will have to cut VPL benefits or raise additional premium contributions.

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