AEGON Global Pensions has helped many multinational companies to find the right solution to meet their needs. In this example, you can find out how AEGON Global Pensions helped Hero reduce its pension risks.
Hero BV is a specialist producer of high quality consumer foods, focused on fruit products and infant nutrition. Founded in 1914, Hero BV is the Dutch subsidiary of the Swiss-based Hero Group. In 2007, Hero acquired Friso baby Foods, an infant milk business. Hero BV operated two Defined Benefit (DB) pension plans, a guaranteed reinsured plan for Friso employees and a company pension fund for Hero employees. In the summer of 2009, the Hero pension fund decided to look for a way to remove the risk of the Hero DB plan while protecting the interests of its pensioners.
Derisking - when timing is everything
Through discussions with consultants, Hero had identified that it could fully derisk its pensions, using a pension buyout for its inactive participants and a guaranteed insurance for its active participants. However, the funding ratio of the Hero pension fund was almost precisely 100% at the time Hero decided to derisk its pension fund – and a pension buyout requires the agreement of both the participants and the regulator.
‘We were faced with a dilemma – we knew we had sufficient funds in the pension to perform a buyout at that moment – but we had to have the agreement of both the regulator and our participants first,’ says Jop Peek. ‘If we waited until we had received permission for a buyout, there was a high chance that we would no longer be able to afford it, as the financial markets were so volatile!’ In addition, as both the assets of the pension fund and the price of an insured contract vary with market changes, there was a possibility that the active members could be disadvantaged once the contracts were signed in comparison with the inactive members. The regulator would not therefore be able to approve such a solution.
Hero turned to AEGON, who proposed using a pension buy-in to enable Hero to carry out the buyout. Hero was the first company to use a buy-in solution in the Netherlands.
More information?
To find out more on how Hero derisked its pensions, please read the full article.
