With 22,000 employees scattered among 30 operating subsidiaries and across 80 countries, Venlo based Dutch giant, Océ, is one of the world’s leading companies active in the design, manufacture and marketing of high technology printing and copying products and services.
At present, Océ has, in common with many international groups, a fragmented network of insurance and pension schemes that are country bound and dependent on local practices and regulations. But this isn’t seen as being the best solution and the group is trying to set up a standard practice where legally feasible.
“Our overall policy is to change our pension schemes across the board from a defined benefit (DB) structure to defined contribution (DC) types as quickly and efficiently as possible,” confirms Bert Kiffen, Océ’s international pensions manager based in Venlo. He says that the main benefits of such a development are more efficient and easier scheme control and management alongside cost effectiveness. But there is a long way to go.
“The type of fund we have still differs greatly from country to country. Changing schemes isn’t that easy and takes time,” says Kiffen. There are two schemes in operation in Germany, one of which has already evolved into a DC type, with work going on to convert the other from DB to DC.
In Belgium and the US, the schemes have moved from DB to cash balance plans, which are similar to DC plans, but function like a DB plan in that they contain an element of guaranteed interest. “These are not quite DC schemes but it’s moving in the right direction,” Kiffen comments.
In the Netherlands and the UK there are still DB plans in operation, and changing these could prove difficult, as Kiffen points out that not everyone is keen to change. “Many people wonder why we bother to talk about change, especially in the UK and the Netherlands, where many schemes are over funded, meaning people don’t have to contribute anymore and investment returns are high.’ Nevertheless he stresses that people are beginning to realise the problems posed by changing demographics and working conditions.
Not all major countries where Océ have a presence are covered by group pension plans. There are no schemes in France, Italy or Portugal. “Basically, in these countries, the local benefits and social security systems are sufficiently well funded as not to merit us setting up schemes there. But if we need to in the future, and we probably will given the changing nature if the working population, then we will look into opportunities there.”
In line with company policy, any new schemes established will be DC type. “ That is something we are certain of.”
In other countries, Kiffen says that Océ is not big enough to justify having segregated portfolios in which to invest for retirement provision and instead insures their schemes with insurance companies. “In Denmark, we are insured with Danica, in Norway with Gjensidige and Mutual Life in Japan. We only really have segregated actively managed portfolios in the Netherlands, UK and US.”
But there are no captive insurance companies used yet for the company’s multinational insurance pooling arrangement. “ We looked into captives some years ago, and concluded that it doesn’t make sense to use them,” says Kiffen. Basically, Kiffen believes that it is difficult to fund pension funds from captives, with only risk benefit groups tending to make good use of them. “ If you consider the total amount of money involved in risk benefit, then it simply isn’t worth it. Pooling arrangements offer a better solution, with the main advantage being that even if you don’t have the money to invest yourself, it can be done through the pooling arrangement.” Kiffen also points out that extra administration costs are also incurred where captives are used because of the reinsurance fees.
But multinational pooling is an area that Océ is actively pursuing, and this will remain so even if a pan-European pension fund were to become reality.
Océ uses five pooling networks at the moment but there is a proposal in the company to reduce this to three. “Five is considered too many for a company the size of Océ, so it makes sense to reduce to three,” says Kiffen. He says that the process has already started and will be administered from his office. “The headache comes when you have to cancel local insurance contracts only to set up new ones!”
The multinational pooling arrangements are used for compliance and disability as well as pension provision. Post retirement health benefits are only available in the Netherlands.
With the talk of switching to DC plans comes the debate about employee mobility across schemes and the European Commission’s proposals to make cross border pension arrangements more flexible.
“Cross border mobility within the group causes headaches where there are DB plans, since final pay will be tied to tax regulations within that particular country, something you don’t find with DC plans. But EC tax relief proposals are helping us coordinate our pension arrangements,” says Kiffen, who says that national governments taking note of demographic changes are now keen to do something. “We already see some countries allowing cross border pension arrangements, even in the case of DB.”
Coordinating the various schemes isn’t an easy task, however, and there are no immediate plans to bring each scheme under one roof. “The complexity of the different country legislation and taxation systems would make this nigh on impossible,” Kiffen points out. However, he doesn’t rule out the possibility of a European asset pool, helped by tax harmonisation. “To do this at a global level would mean having a global custodian and it would become incredibly complicated, but at European level it could be feasible given the right pensions reform.”
Investment strategies vary from country to country. For instance there are severe restrictions on the amount of equity investments allowed in Germany, but not in the Netherlands. One asset class Kiffen would like to do away with, however, is property. “If I had my way, I’d get rid of property. Sure, recently we’ve seen some pretty good returns from real estate, but in the long run, it doesn’t perform as well as equities or bonds,” he says. There are no alternative investments used anywhere and furthermore, Kiffen says there are no plans to start using them at the moment.
Océ also rejects using consultants on a global basis. “We use them on a fee basis in each country. We have been approached by firms offering worldwide consultancy strategies, but because not all firms are present everywhere, we prefer to use locals since they know the markets better,” says Kiffen.

Topics