Following the publication of Jeroen Bogers’ white paper on pension de-risking and Tony Read’s interview on pension de-risking in the UK, AEGON Global Pensions interviewed Arie Perfors on pension de-risking in the Netherlands.
De-risking is a process
According to Arie Perfors (Director Pensions, AEGON The Netherlands), de-risking should be understood as a process rather than as a single activity. It includes inventory-taking, quantifying risk, and analysing present and future pension risks. Equally importantly, the process also includes deciding which risks are acceptable and which need to be reduced or removed.
De-risking in the Netherlands
Between 2005 and 2008 pension buy-outs took off in the Netherlands. The pensions of ex-employees were transferred from the pension fund to an insurer with a guaranteed level of indexation. The financial and economic crisis and the drop in funding ratios brought the Dutch buy-out market to a virtual standstill.
Over the same period, the number of Dutch pension funds has declined dramatically. About 40% of the pension funds that have closed have merged into an industry-wide pension fund; the remaining 60% have chosen an insured option, Perfors says. Collective DC plans – a typical Dutch consensual solution – are also becoming increasingly popular. This trend has also been stimulated further by the crisis.
The market for buyouts is starting up once more, as many pension funds have recovered from the worst of the crisis.
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