The pension fund of oil major BP is planning to start a new defined contribution (DC) arrangement for its Dutch employees with a Dutch pension provider, according to Peter Paul van Tilborg, HR director at BP’s Dutch branch, and director of the BP pension fund in Belgium.
The fund is also considering a buyout to a Dutch insurer for its Belgium-based defined benefit (DB) accruals, leaving the future of its €1.6bn pension fund uncertain.
BP transferred its Dutch pensions to a Belgian pension fund in 2016, which manages €1.6bn for more than 7,000 participants from six European countries.
The Dutch pensions have since formed the majority within this fund, with 4,500 participants and €1.2bn in assets (at the end of 2023).
The upcoming pension transition in the Netherlands prompted BP to reconsider this set-up, and evaluate whether it could run the pension scheme itself better than “the market,” said Van Tilborg.
“The answer was no. We talked to consultants, and started by looking at a standard lifecycle at a commercial pension provider, which turned out to fit well with our participants’ risk preferences,” he added.
The firm’s new DC arrangement will be placed within a Dutch pooled pension fund or another commercial provider. According to a proposal by a working group which included representatives of the employer, the fund, the workers’ councils of its Dutch oil refinery and its main office in the country, as well as trade unions.
Buyout
For existing DB accruals, BP is considering a buyout to a Dutch insurer. The firm is now exploring the possibilities with insurers and is consulting with the workers’ councils on the minimum indexation needed to reach a deal.
“As the new DC pensions will be accrued elsewhere, we are dealing with a closed pension arrangement which is going to shrink. So you’ll have to look at consolidation over time anyway,” Van Tilborg noted.
“Because market conditions are favourable, we want to do this research now. If we as a fund have enough money now to buy a nice indexation and take risks off the table, why wouldn’t we do that? We are an energy company, not a pension fund. At the same time, if we can’t buy enough indexation, it won’t happen,” he added.
If it is decided to go for a buyout, members will have the right to stay behind in the Belgian fund, according to Van Tilborg. “If it is only a very small group that wants that, we will have to reconsider, however.”
If BP’s Dutch employees leave the Belgian BP fund, it will be a lot smaller, with only about €400m in assets remaining, for Belgian, Spanish, Irish, Swiss and Cypriot employees, plus perhaps the Dutch objectors.
“After the process with the Dutch accruals will be completed, we can further evaluate the future of the BP fund,” said Van Tilborg.
Other companies
Two other large employers with Dutch employees in a Belgian fund are Johnson & Johnson and ExxonMobil. Both of these funds state on their websites they are working on the design of new DC arrangements. It is not yet clear, however, whether these arrangements will be moved back to the Netherlands too. They could also stay in Belgium.
Belgium-based multi-company scheme United Pension is currently setting up a DC arrangement, according to director Hans Rekker.
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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