ABN Amro Pensioenfund believes itself to be the most fun scheme in the Netherlands. That’s as maybe, but the fund, introduced at the beginning of last year for ABN Amro Bank employees in the Netherlands is more noteworthy for its structure rather than anything else. The fund claims that a hybrid approach combines the solidarity and security of a defined benefit (DB) scheme with the individual flexibility normally associated with defined contribution (DC) scheme.
“The freedom of employees, regardless of their income, to choose their own balance between security and flexibility, in combination with the DC administration, makes this scheme different from any other new scheme,” says the fund’s application. And it’s this characteristic that the fund believes makes it so much fun.
In the Netherlands, where the DB approach prevails, ABN Amro’s scheme is an interesting hybrid. Under a DB scheme, the fund or the employer is exposed to the investment and actuarial risks. Under a DC fund, it is the employee shouldering the risk. ABN Amro claims its scheme combines the best of both worlds. Administration is carried out along the lines of a DC approach, thereby enabling individual, tailor-made solutions. Individuals not wishing to shoulder the investment and actuarial risks need not.
For each employee, the bank pays the fund a premium according to both the individual’s age and income. If employees pay the premium into the standard provision, they are guaranteed a certain amount on retirement. In other words, they undertake no risk. Employees now have the option of investing part of the premium in individual investment funds and for this part of the pension the member assumes all the investment and actuarial risks. On retirement, the two are combined.
ABN Amro levies no age constraints and members can now accumulate a pension of up to 75% of their average indexed wage. The standard pensionable age has been lowered from 65 to 62 and the option of retiring early between 60 and 65 has been abolished. Members are apparently allowed great leeway both while accumulating assets and on retirement to influence and individualise the shape of the final pension. During the accumulation of the fund, members can decide whether to include a dependant’s pension, invest part of the premium themselves and supplement their savings themselves, thereby increasing the final pension.
Members can opt to retire anywhere between the ages of 57 and 67 and, whenever they decide to do so, are offered great flexibility. They are able to vary the size of the benefits over time, to retire part-time and to omit a dependant’s pension.
ABN Amro concedes that the switch from a DB scheme to one under which the individual is given some say in the matter is a difficult one to convey and explain to members. The bank, the pension fund’s executive committee and the council of members have drawn up a model for communicating with scheme members. First of all, the fund took a direct marketing approach and sent information packs to members who, having looked at it, were backed up by a help desk created recently.
The package included a letter containing an overview of the relevant individual as well as general data such as the accumulated pension rights to date. It also sent a journal comparing the two schemes and explaining the implications of the various options. In addition, the magazine Fundview and a CD-ROM PensionPlanner were distributed to each member.
The fund says the new scheme has proved popular and that employees are far more aware and knowledgeable about pensions since the restructuring. In addition, 300 members of the personnel department were sent on a training course to familiarise themselves with the new structure, making sure that the help desk is able to provide a satisfactory answer to any query.
ABN Amro maintains that whatever happens in the future, the pension scheme will be able to adapt and that the infrastructure is sound: “In the event of changes in generally accepted social standards on care and remuneration, only the controlling variables need to be adjusted while the essential character of the scheme remains unaffected”.
As an epilogue, the fund includes a few statistics that it has as feedback to the new scheme. Two thirds of employees studied the information package, 43% used the planner and one in 10 called the help desk. A fifth will be investing part of the starting capital themselves, a quarter will be investing some of the starting premium themselves and almost three in 10 will be supplementing their own savings.
ABN Amro estimates that the total cost of designing and introducing the new system for employees amounts to around NGL 10m (e4.5m). As the bank has 40,000 employees, this amounts to NGL 250 per person.

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