The first Dutch pension funds will move to new defined contribution (DC) arrangements on 1 January 2025. They are well on track for the move, but according to their administrators, nothing is yet certain. “The final do or die moment will only happen in December,” according to APG’s Wim Koeleman.
Koeleman, director of pension operations at APG, made his statement on Tuesday during a panel discussion at a pensions congress in Amsterdam organised by IPE’s Dutch sister publication Pensioen Pro.
APG, the Netherlands’ largest pension administrator, has two pension fund clients (PWRI and APG’s employee pension fund) that are set to move from defined benefit (DB) to DC arrangements next year.
“We have agreed three evaluation moments with these funds. The first one happens in August when the funds have to decide whether to send a transition statement to members. This will be followed by another session with the board in October or November. Finally, in December we’ll see the final ‘no-go’ or ‘go’ moment,” Koeleman said.
Emergency brake
At Blue Sky Group, Achmea Pensioenservices and TKP, the three other administrators sitting on the conference’s panel, any final decisions on pension funds moving to DC will also not be made until December.
“However, you will be somewhat pulling the emergency brake if you were to decide in November or December not to move to DC. In such a case, something really must have gone badly wrong,” said Paul Everloo of TKP, which also has two clients transitioning to the new pension system early next year – Kring Holland Casino and Zoetwaren, the fund for the confection industry.
According to Koeleman, it should become clear some time over the summer if a pension fund can technically make the DC transition successfully. “As soon as that’s the case, we want to be able to establish that all processes and systems are in order. We will do three test migrations for this, and a final rehearsal in December,” he said.
A second factor is the assessment process of pension regulator De Nederlandsche Bank (DNB).
“DNB may not outright ban a fund from making the transition, but it can come up with a demand that can be financial or operational in nature. Finally, your financial position must be such that making the transition is possible,” it noted.
In the case of both APG’s staff fund and PWRI, the minimum funding ratio required for the DC transition is 105%.
Longing for complexity
A key aim of the Dutch pension reform was to replace the complexity embedded in many of the current DB arrangements with plain vanilla DC arrangements that are cheaper to execute. This seems to have been less successful than hoped.
“There is a certain nostalgia for complexity. You want to simplify things, but you don’t always succeed and it’s actually understandable,” said Tom Bottinga of Blue Sky Group, which will also move its first pension fund (shipping pilots fund Loodsen) to DC on 1 January.
Achmea Pensioenservices, which is also starting with two occupational funds (physiotherapists and veterinarians), on the other hand, remains “very reluctant to customise an arrangement,” according to Mirjam Breekelmans.
“The palette we offer is sufficient in principle. Customisation implies extra costs,” she said.
TKP’s Everloo also said the customisation option has so far been “hardly used”.
Less political risk
The fact that the country’s incoming government, that will be inaugurated on 2 July, did not make any agreement on modifying the new pension law, has been welcomed by the administrators as a sign that nothing will change to the law.
“I do still worry about what happens in The Hague. But when it comes to pensions, I don’t anymore,” said Bottinga, referring to the expected political instability of the new coalition led by the far-right Freedom Party, which has no experience in government.
“Nothing can be changed anymore about the pension law now,” he added.
For Everloo and Koeleman, too, worries that politicians might still throw a spanner in the works have all but disappeared.
“I am not worried and do not expect any changes in the short term,” said Koeleman.
APG had long been wary of last-minute changes to the law. “Political risk had been very high on our dashboard for a long time, but it has now dropped quite a few places,” he said.
However, the fact that there is no agreement on pensions within the new government still worries Achmea’s Breekelmans.
“Pensions are now a free issue. It’s not a closed issue so I do worry about possible adjustments and their impact on the duration of the transition and our own organisation,” she said.
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