Bosch Pensionsfonds, the pension scheme for the employees of the German engineering and technology company, is shifting to a new governance model, strengthening expertise and resources within the scheme, to deal with a complex regulatory environment, as it expects to expand its assets under management.
The scheme has chosen to build up expertise within its Pensionsfonds, ditching instead other options, which include expanding the service provider contract with the plan sponsor or further outsourcing, said chief executive officer Dirk Jargstorff, speaking at the annual conference organised by German occupational pension association Aba this week.
The pension fund has hired the first 10 employees to begin with the process of “personalisation” of the scheme, tackling asset management and regulatory topics, issues around pension fund operations, and communication, the CEO added.
The scheme is pondering now where to exactly locate competencies and resources, he said.
The aim of the new governance structure is to reinforce the strategic and operational management of the pension fund, and functions falling under the regulatory framework, minimising key personal risk, according to the CEO’s presentation.
Members will benefit from investments in risk management, regulatory compliance, and from an even more opportunity-oriented, and green, asset allocation, the presentation added.
So far the scheme’s governance, intended as management and outsourcing, revolved around the role of departments centralised at company level, responsible for service providers and mandate management, Jargstorff said.
The structure of the Pensionsfonds, which were intended as a separate entity, had no employees, and oversaw fiduciary management, investment controlling, financial services, and legal issues, among other topics, he continued.
Under the new governance concept, Bosch – as a corporate entity – the Pensionsfonds, and the service provider become three cooperative entities.
“For us this is a very important change,” Jargstorff said.
Bosch believes the old governance model would no longer work for a scheme facing a number of challenges.
Last year the scheme had €500m in income with pension payouts amounting to €136m. ”That means income surplus and, if you assume a certain progress [in terms of] capital, that leads to acknowledging that the organisation grows – that is challenge number one,” Jargstorff said.
Bosch expects assets from direct promises (Direktzusagen), another occupational pension option it offers, and assets in the Pensionsfonds to grow to €10.2bn this year, and to €12.8bn by 2029.
The Pensionsfonds, which now has assets under management of over €7bn, will account for the largest share of the assets by the end of the decade at almost €10bn.
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