Toine van der Stee, who took over as managing director of Blue Sky Group recently, is a relative new comer to the pension sector and appears very upbeat about current developments. “I always make a comparison between the pension sector and other financial sectors in the Netherlands,” he says
“Some of the problems of the pension sector are due to the fact that the sector in the Netherlands lags significantly behind the banking and insurance sectors when taking into account legislation, regulations and supervision issues. New developments and regulations are in general implemented later in the pension sector than in other financial sectors. The overall picture shows that in the end all sectors have to go through the same changes and development.”
According to van der Stee, the sector will witness a period of increased professionalism. The increase in regulations and supervision will result in further
professionalism within pension funds. The additional administrative workload will lead to further consolidation in the sector. How far this development will result in mergers or takeover of pension funds is still unclear, in his view.
Van der Stee sees good reasons for independent corporate pension funds in the future. One of the main reasons for independence is the fact that the vehicle still has attractions for sponsors. Increased administrative pressure will lead to a greater appetite for outsourcing certain aspects of the daily routines or management work of funds.
Will there be a growing tendency for Dutch funds to opt for international non-domestic managers, such as has partly happened in the Philips and Merrill Lynch case? His answer is a straightforward ‘no’.
According to van der Stee there are enough specific reasons to expect pension funds to stay within the reach of Dutch managers. One of the main reasons is the fact that there are not many outside managers capable of addressing ongoing and future issues with specific knowledge of the Dutch markets. He reiterates that the Philips example has not been a real case of outsourcing to a foreign partner, as Merrill Lynch has taken over the manager’s organisation of Schootse Poort, (see page 12) in combination with Hewitt.
A number of financial players have argued that there could be a move by pension and investment funds to relocate their headquarters and assets to Luxembourg based on better tax incentives and other financial factors. Blue Sky Group, however, does not expect this to become a likely future scenario.
Van der Stee says: “I don’t think it feasible that many pension funds will take the same approach and move to Luxembourg. Some specific funds will decide to go there, especially if pension funds are based on a DC system, which makes it easier to take the Luxemburg route. In general, most funds will stay in the Netherlands.”
One of the main changes in the Dutch pension sector is the growing impact of DC-based pension arrangements. Several analysts and politicians have been stating that defined contribution (DC) should become the main basis of the future Dutch pension system. Acknowledging that the impact of DC is a growing, he still reckons defined benefit (DB) will stay the primary basis. “I don’t have any indications that in the Netherlands the majority will opt for the DC system. The DB is still alive and kicking.”
He adds: “At the same time, an increasing number of funds and pension arrangements will opt for a hybrid system, which will have some parts of its arrangements based on DC and DB basis. A possible choice will be to have a DB system up to a certain salary level, after which the higher levels will be based on a DC system.”
Van der Stee expects that the levensloop arrangements, the end to pre-pension and VUT will be put into place without dramatic effects on the sector. “The new pension rules and regulations, such as nFTK and the pension law will not lead to the introduction of a DC-based pension system. But for most companies and plan sponsors, it will also become a necessity to reassess their current risks and liabilities.” Several corporations, after an assessment of their risk and liabilities, will opt for a DC system. “This has already been shown by the recent cases, such as AKZO, which have taken the DC route to counter possible financial risk scenarios.”
However, it is not only the pension sector that has been confronted by new supervision and regulations. The insurance sector has also been a main target of the Dutch government and central bank. Van der Stee even stated that the “insurance sector even has it harder. In contrast to the pension funds, insurers have to deal with a vast number of small parties and individual subscribers. These will all have to be contacted and informed about the ongoing developments and changes. These parties will have to be reached to be involved in the implementation of a new system.”
The implementation of nFTK and the new pension law has been anticipated by Blue Sky Group. In its reports, the group already has stated that it will implement the changes brought forward by the new supervision rules, liability structures and regulations. The group has also reiterated its intention to strengthen its strategy regarding investment management of funds and for other clients.
With a strong financial position, based on profit before tax of E3.3m, the future looks bright. Van der Stee is very optimistic about the opportunities he perceives. The growing need for professionalism and management assistance will only play to the strengths of groups like Blue Sky. The requirement is to provide an integrated portfolio of services for pension funds, which is what Blue Sky can do, he points out.
Future growth will be targeted largely in the so-called middle and small corporate pension funds. Van der Stee does not expect that the larger funds will consider outsourcing. And he expects that the group will take an ever increasing part of the middle and smaller pension funds cake.
“The so-called top 20 of pension funds are too large to need additional outside support; they have enough power and possibility to do it all themselves. For Blue Sky , the group below this is very attractive. A number of these funds will go for the insurance option; the rest will be ready to be served by organisations such as ours.”
The implementation of the nFTK will result in a vast number of new pension arrangements, which have to be implemented in the respective systems of pension funds and managers. This will, for the short term, increase the administrative workload substantially.” Pension sector communication is one of the main policy targets at present, he points out.
There is no doubt that the new role of the pension sector and the impact of the nFTK will be felt. But the effects on the sector of the issues of real values and liabilities still remain unknown.

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