Looking back and looking forward

As he prepares to leave the chairmanship of Cordares, Joep Schouten, 59, is still focused on the challenges ahead for the €25.5bn pensions provider and asset manager.

“Although Cordares has developed into an advanced pensions provider, it can’t sit back and relax,” he says. To spread the company’s commercial risks, and to successfully compete with the buying power of London, it will need to grow considerably, be it through acquisitions, a merger or a take-over.”

He believes in consolidation. “It will benefit the whole sector. Professionalism will increase, and costs will go down. It will increase our buying power on the labour market and the financial markets, and a Cordares with €100bn of assets under management is not too big,” he says.

Schouten has worked with different numbers within a totally different environment. In 1970, when he began his career at the Sociaal Fonds Bouwnijverheid (SFB), the pensions provider for the building industry, SFB had €800m of assets under management.

Schouten started as an administrative assistant on the shop floor when he was 22. “I had to do a lot of writing for little pay,” he recalls. “The whole environment was dull and grey, including most of my colleagues. On my first day, I made a bad start. I had to re-do all my pencilled markings on a pile of punch cards. I had done them from right to left, as I am left-handed, and it had to be done the opposite way.”

Only pride prevented the ambitious young Schouten from leaving SFB as soon as possible. “I didn’t want to admit that I had made a wrong choice,” he says. “But soon I spotted the opportunities within the organisation, which also noticed my potential and supported my developing skills. A new job as correspondent with our members developed into a much more important position, thanks to innovations I managed to introduce.”

Schouten worked his way up through almost every department within the SFB. In 1983 he became director of human resources. Five years later he was appointed the new head of the benefits department, followed by the directorship of policy and contributions collection. In 1992, he joined the SFB’s board of directors, becoming chairman in 1996. Along the way he became involved in the IT development, the back office and communications. “That’s how I got to know something of every part of the company,” he says.

During his 37 years at SFB and Cordares, Schouten has seen significant developments. Pensions have changed from a relatively straightforward concept, to a highly complex product. “In the early seventies, a pension was only aimed at providing 70% of the last earned salary, including the state pension AOW, after contributing for 40 years to the same scheme. The retirement age for everybody was 65. There were no flexible arrangements. The premiums were, at least partly, being paid by the employer,” he says.

“In addition, there was a surviving relative’s pension. And in case of a divorce, the pension just went to the breadwinner, who was usually the male counterpart. In most cases, the woman lost out.

“The working population was much younger then. That’s why most of SFB’s own assets were made up from contributions, instead of investments nowadays.”

Although investments were for the most part the same basic asset classes as today, the allocations were quite different, says Schouten: “The pension fund for the building industry invested 70% of its assets in fixed income. Another large allocation was in direct real estate, mostly residential properties in the Netherlands. Investments in equity, which consisted solely of Dutch shares, made up perhaps 10% of the total investment portfolio.”

Schouten feels that investing has become far more varied and interesting, with new asset classes and investment styles. “The administrator, who took his work home in a shoebox on the back of his bicycle, has made way for complicated computerised administrative processes. Things have become much more professionalised, mainly because our payment structure has been linked to the business world, instead of government.”

Some pensions issues, notably indexation, have become more important in the past decade. “For a long time this hasn’t been an issue,” he says. “The pensions were simply linked to the annual pay increases. The pension funds always had the means for this. The concept of coverage ratio as a management tool just didn’t exist. The same goes for risk management.”

The idea of socially responsible investment (SRI) has also grown in importance. In the 1970s, things were different. When SFB invested in Outspan oranges, a product of the then apartheid South Africa, SFB’s financial director was not amused, Schouten recalls. “‘We are not interested in ethics. It’s about returns’, was his reply.”

The collapse of the equity markets in 2001 triggered a big change in the pensions sector, says Schouten. “Coverage ratios dropped below 100%, leading to a totally different risk management by the pensions regulator , De Nederlandsche Bank,” he says. Its new financial assessment framework requires a buffer in the funding ratio of at least 30%, to be built up as quickly as possible.

“Simultaneously, pension premiums went up, and companies started to decrease their contributions at the expense of their employees. Many companies also economised on their schemes, for example by changing from final salary schemes to average salary plans. And indexation was downgraded from a implicit right to an optional benefit.

“The introduction of the International Financial Reporting Standards didn’t work out well for workers either. Because the responsibility for the pension fund’s portfolio became more the domain of the financial director, a growing proportion of companies changed their scheme from defined benefit to defined contribution, which puts more financial risks with the employees.”

On 1 October Joep Schouten will close the door of the Cordares office in Amsterdam for the last time, “allowing for a fresh breeze through the tent”, as he himself puts it. “If you stay too long in this job, you run the risk of relying too much on routine, and that might impede maximum performance,” he points out. As of the same day his job will be taken over by member of the board of directors Adri van der Wurff, who has so far been responsible for IT, services and insurance at Cordares.

Schouten’s advice for Dutch pensions is to become much more active on the international front. “In my opinion, we have a lot to offer to other countries. The Dutch pensions sector has invested heavily in pension systems, supervision, asset liability management and asset management after the war. It must be possible to export our knowledge and experience. The pensions sector is a unique selling point in the Dutch financial market,” he says.

“So far, the sector has been too timid. It has been hampered by the forced balance between employers and workers in pension funds, which absorbs to much energy and defensiveness. It is better to look for the opportunities. In addition, an overkill in supervision has a cost-increasing effect, which makes competing difficult, and is ultimately paralysing cross-border initiatives.”

Schouten is as yet undecided about what he plans to do after Cordares. “First I’ll be having a sabbatical,” he says. “Part of it will be a long visit to Vienna, for a further reflection on my future. Over there, I will also try to hone my piano playing, one of my hobbies. My Dutch teacher has told me that my skills have room for improvement.”