PWRI, the Dutch pension fund for disabled people working in a sheltered environment, has deferred discussions about merging after two rounds of negotiations with healthcare scheme PFZW failed to deliver results.

In its annual report for 2017, the €8.8bn scheme said it would start seeking benefits of scale through a merger no sooner than 2020, as it would be able to remain independent “for a considerable time”.

After a second round of talks with the €197bn healthcare scheme, PWRI concluded in 2016 that a merger would not benefit its 206,000 members.

According to Xander den Uijl, PWRI’s chairman, it was not certain that his pension fund would approach the healthcare pension fund again.

“At the time, civil service scheme ABP and the sector schemes for agriculture and cleaning were also potential merger candidates,” he said, adding that conditions had changed in the meantime.

“We need to re-do our homework and scrutinise our pension plan by focusing on simplification and cost reduction,” he added.

The chairman said PWRI needed to assess, for example, whether it wanted to keep its own labour disability arrangements, and whether it also wanted to wait for the introduction of a new pensions system in the Netherlands.

PWRI closed to new entrants in 2015 when new rules were introduced requiring regular companies to also hire staff employed in sheltered workshops.

In order to mitigate the negative impact on the pension fund, the Dutch government promised an annual contribution of €10m over a 40-year period.

PWRI largely credited rising interest rates and equity performance for its net return of 9% last year, an outperformance of 0.7 percentage points.

With a gain of 21.2%, its stake in emerging market equities performed best over the year. US stocks and European equity delivered 19.4% and 14.5%, respectively.

The scheme said it had decided to switch to passive investment for the latter two equity regions. It also planned to merge its entire equity holdings into two worldwide portfolios, one for emerging markets and another for developed economies.

It added that it would keep the option of implementing its own ESG policy within the passive mandate.

Last year, PWRI’s board decided to increase its holdings of green bonds from €200m to €300m. It has already bought stakes in a Swedish windfarm as well as in electric taxi company in the Philippines.

The scheme also doubled its impact investments – aimed particularly at encouraging companies to hire disabled workers – to €100m.

PWRI said the combined allocation to impact investments and green bonds would eventually make up 5% of its entire investment portfolio.

The pension fund lost 0.5% on its allocation to core euro-zone government bonds, while Italian and Spanish bonds generated 1.6%.

Local currency and dollar-denominated emerging market debt yielded 3.2% and 9.4%, respectively, while residential mortgages and private equity gained 1.7% and 10.7%, respectively.

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