Dutch supermarket chain Ahold Delhaize will buy out its sponsorship guarantee to its company pension scheme. At the end of this year, €155m will be paid into the €5.7bn pension scheme’s coffers.
According to the current defined benefit (DB) arrangement of Ahold Delhaize Pensioen, the firm must make additional payments to the fund if its funding ratio drops below 104.6%. The last time that happened was at the end of 2020, when Ahold Delhaize paid €122m to its pension fund.
The guarantee is capped at €150m in additional payments every five years.
The reason for buying off the sponsorship guarantee now is the arrival of the new pension system, explained Renate Pijst, the fund’s director. After all, such a sponsor guarantee is no longer possible after DB accruals have been converted to DC capitals.
Negotiations
The amount of €155m is the result of negotiations between social partners, Pijst said. The surrender of the sponsorship obligation at the end of this year will push the funding ratio up by about 3.5 percentage points – the fund’s assets amounted to €5.7bn at the end of the second quarter of this year. At the end of October, the fund’s coverage ratio stood at 124%.
In recent years, many companies have bought off the sponsorship guarantee to their pension fund. Ahold Delhaize was among the last in the Netherlands to have one.
An example of a firm that recently did this is Shell. The oil and gas company will pay at least €500m into its own pension fund. Unlike Ahold Delhaize, the total amount to be paid by Shell will still partly depend on the funding ratio just before the fund converts its assets to a new DC arrangement, also in 2027.
Ahold Delhaize has opted for the solidarity arrangement with more collective features, rather than the more individual flexible arrangement, despite the fund having many young participants who only work for the firm for a short time.
“The social partners consider the idea of care and the sharing of risks to be important,” the fund stated as an explanation in its transition plan. The maximum size of the solidarity buffer has been set at 5%. According to the fund, even at 1%, that buffer offers “quite effective protection”.
This article was first published on Pensioen Pro, IPE’s Dutch sister publication. It was translated and adapted for IPE by Tjibbe Hoekstra
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