If you were seeking a mantra for pension funds in Europe to chant when addressing fund structure and administration issues, a close look at the principles employed by the e3.5bn Brussels-based pension fund for Belgian telecommunications group Belgacom would go a long way towards writing the script for you.
The Belgacom scheme, Belgium’s largest fund, has a clear mission in mind with regards to retirement. The company sees pension provision to employees as a plus, not a drag on profitability. A cornerstone of the fund’s philosophy is that it is seen as a profit centre and not a cost centre.
For employers, the benefit of a clear and attractive pension fund is the investment in human capital and cost efficiency. On the workers’ side, a clear, separate funding structure creates more guarantees for current and future pensions. For unions the benefit is the investment in social peace, while for the government the contracting- out model makes industrialised public companies accountable for their own pension costs and any anticipation of future demographic shocks.
However, the scheme did not arrive overnight at the point where it is now seen as one of Europe’s leading pension fund innovators. Since 1930 it has been responsible for a portion of the state pension provision and has explained, negotiated and justified its pension moves with the government ever since.
In this respect, Belgacom has a track-record of pensions engagement that is almost unrivalled in Europe. Many will be surprised, though, to learn that until 1995 the fund was a pay-as-you-go (PAYG) entity . When the firm took the initiative of setting up a separate legal entity to separate the pension assets from the corporate risk, it took two years of negotiation with the government before the fund could gain the necessary legal authorisation.
Philip Neyt, the general manager of the Belgacom scheme, knows the hard work that has gone into making the scheme one of Europe’s most secure, transparent and accountable pension plans.
His confidence in the fund led him to put Belgacom forward for the IPE-Awards, with the view that it could act as a model for other European funds.
The decision reflects both the openness of the scheme and a faith that being held up to the light to reveal its inner workings should not uncover too many flaws.
As Neyt comments: “We’ve put a lot of attention into our organisational design since it reflects our decision-making process.”
Another reason for the submission, Neyt says, was to be challenged by an independent panel of judges and to get their feedback: “I look forward to hearing what their comments were; for me it’s more important to know why than being the winner.”
The three pillars at the heart of Belgacom’s pensions policy – security, transparency and accountability to all shareholders – will be familiar to many in the European pensions arena. But the speed at which Belgacom has made these pillars secure is a testament to the fund’s professionalism.
The list of policies introduced in the last six years reads like a textbook for European pension development; recognition of unfunded pension liabilities as a corporate debt/obligation, introduction of dynamic funding policy, integrated financial management, dynamic ALM studies, risk assessment on a corporate level with VAR and downside risk included.
Furthermore, the fund’s position as the first Belgian public sector company pension fund also qualifies it as a blueprint for the way in which pensions in Belgium were looked at. Its very existence is evidence of the Belgian government taking a long-term view on pensions involving intra-generational solidarity through the boosting of funded provision and greater understanding of capital markets.
Truly, there are not many pension funds in Europe that can lay claim to such influence.

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