Transcript Cross-border IORPs serving pension needs of multinational

European Pension Summit – Amsterdam – 11 November 2009
Cross-border European pension funds (IORPs)
The positioning of The Netherlands in the emerging
European pension market
Jacqueline Lommen
To protect the confidential and proprietary information included in this material, it may not
be disclosed or provided to any third parties without the approval of Hewitt Associates LLC.
Agenda
• The IORP* Directive - some basics
• IORP Market developments
• The Netherlands – PPI, MOPF & API
• Questions & Discussion
2
IORPs*: Institutions for Occupational Retirement Provision
2
Agenda
• The IORP* Directive - some basics
• IORP Market developments
• The Netherlands – PPI, MOPF & API
• Questions & Discussion
3
IORPs*: Institutions for Occupational Retirement Provision
European Pensions Directive – state of affairs
 IORP Directive (2003/41/EC) has been issued in 2003
 Implemented in 2005 – 2007
 All EEA30 member states have IORPs in place
 30+ different IORP vehicles
 Circa 10,000 IORPs
 Circa 100 cross-border IORPs
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IORPs: Pension institution vs. schemes
IORP Directive
IORP*
Pensioninstitution
(financing vehicle,
Legal entity)
Pensionscheme
A
Pensionscheme
B
Pensionscheme
C
“Single lead
supervisor”
Regulated by the (financial) regulation
of the country of domicile of the
pension institution
(“Home country”)
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IORP*: Institution for Occupational Retirement Provision
Regulated by the social & labour law
of the country of origin of the
pension scheme(s)
(“Host countries”)
IORPs: Pension vs. Asset vs. Risk pooling
Risk pooling
Company A
UK
NL
Local company / local subsidiary
BE
Pension institution
Pension assets
Investment portfolio
Pension pooling (IORP)
Asset pooling (UCITS)
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Agenda
• The IORP* Directive - some basics
• IORP Market developments
• The Netherlands – PPI, MOPF & API
• Questions & Discussions
7
IORPs*: Institutions for Occupational Retirement Provision
IORPs meeting market needs
Members
CFO / CRO
Reduced operational risks •
•
More grip and control
•
(IFRS, compliance, IORP2)
Efficiency gains
(economies of scale)
Cost savings
(single European entity)
Simplified governance
Reduced internal management time
Improved operational oversight
• Integral risk management
•
•
•
•
Investment performance enhancement
Consistent administration hub(s)
Better access to top quality resources
Fewer providers and interfaces
• Lower regulatory burden
•
•
•
Single reporting
Lower / more flexible financing
Tax advantages
HRM / IEB manager
Flexibility:
maintain
the local scheme
specifics e.g.
format (DC/DB,
indexation),
financing
(funding level,
contributions),
solidarity
(ring-fencing), etc.
Own identity:
Pension provisions for mobile employees and sr executives
Internal branding (common look/feel, equality)
Anticipating and digesting M&A transactions; divestitures
Framework for implementing change (across Europe)
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maintain
governance (social
committee),
Information
(language), etc.
IORPs: a step-by-step approach
Pan-euro IORP
Pension pooling (IORP)
Expats / Sr executives (IORP)
Asset pooling
Risk pooling
IEB Database
Benefit audit / pension benchmarking
Accounting consolidation
Corporate HQ EB manager / global pensions department
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Real life examples IORPs
Early movers (CEIOPS overview):
•
Existing cross-border cases
•
Internationally mobile employees and senior executives
Multinational companies:
•
Combining 2 or more existing local pension schemes or IORPs, stepwise
•
Creating new single pan-European or regional (DC) pension platform
•
M&A: consolidation into group / anticipating and digesting divestitures
Financial Service Providers:
•
IORP subsidiaries of financial services providers
•
New markets, product development
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IORP Location - Regional clusters
Ireland:
• Anglo-Saxon region (UK, US)
• contract law / trustees
• DC focus
• asset pooling focus
????:
• East-European region
• DC focus
• admin hubs
• uniform DC schemes
Belgium
• Continental European region
• DB / DC
• integral pension offering
• checks & balances governance
Liechtenstein ??:
• German-speaking (DE, CH, AT, IT, SCAN)
• DB focus
• integral pension offering
• “rules-based”
• “insurance”culture
Luxembourg:
• Broad regional base
• DB / DC
• asset pooling focus
• corporate control
• financial service providers
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Agenda
• The IORP* Directive - some basics
• IORP Market developments
• The Netherlands – PPI, MOPF & API
• Questions & Discussions
12
IORPs*: Institutions for Occupational Retirement Provision
Algemene PensioenInstelling (API): 3 phases
Phase III
API
Algemene
PensioenInstelling
Phase II
Phase I
Multi-OPF
multi
OndernemingsPensioenFonds
PPI
Premie PensioenInstelling
 change existing IORP vehicle (?)
 Pension Law (“Pw”) (?)
 Ministry of Social Affairs (?)
 broad scope
 target group: local and foreign mutinationals
 change existing IORP vehicle (“pensioenfonds”)
 Pension Law (“Pw”)
 Ministry of Social Affairs
 strict and limited scope
 target group: Dutch multinationals
 new Dutch IORP vehicle
 Financial Law (“Wft”)
 Ministery of Finance
 strict and limited scope
 target group: foreign multinationals
Different IORP vehicles – selection criteria
Funding requirements:
•
Size of technical provisions ánd security mechanisms
•
Flexibility of funding
Governance:
•
Founders, legal form, board composition, social committees
•
Compliance regulation
Scope:
•
Kind of schemes, risk-bearing, outsourcing, clients, etc.
•
Ring-fencing
•
Investment restrictions
Other:
•
Support authorities
•
Discretionary powers supervisor
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IORPs - technical provisions differ considerably
Source: CEIOPS: “Survey on fully funded, technical provisions and security mechanisms in the European
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occupational pension sector”, 4/2008
IORPs financial requirements
Sponsor covenant
Protection institution
Balance sheet IORP
Additional assets
Solvency buffers /
subordinated loans
105%
Additional assets
Regulatory own funds
100%
Assets
Technical provisions
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Security
mechanisms
Fully funded
Positioning Dutch IORP vehicles
Pensioenfonds
PPI
(API Phase I)
Management
composition
Ownership /
founders
Legal form
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MOPF
(API Phase II)
OFP / ASSEP
(API Phase III)
Positioning Dutch IORP vehicles
Pensioenfonds
PPI
(API Phase I)
Management
composition
Ownership /
founders
Legal form
Schemes
Activities
Risks
Ring-fencing
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MOPF
(API Phase II)
OFP / ASSEP
(API Phase III)
Positioning Dutch IORP vehicles
Pensioenfonds
PPI
(API Phase I)
Management
composition
Ownership /
founders
Legal form
Schemes
Activities
Risks
Ring-fencing
Financing
requirements
Regulatory
framework
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MOPF
(API Phase II)
OFP / ASSEP
(API Phase III)
Positioning Dutch IORP vehicles *
Pensioenfonds
PPI
(API Fase I)
MOPF
(API Fase II)
Management
composition
employers /
employees
flexible
employers /
employees
Ownership /
founders
employers /
employees
flexible
Employers /
employees
“flexible”
(Stichting)
flexible
“flexible”
(Stichting)
Schemes
all
“all”
(NL: no DB)
all
Activities
limited
(domein)
flexible
limited
(only NL)
flexible
forbidden
flexible
Ring-fencing
forbidden
optional
mandatory
Financing
requirements
FTK
not applicable
FTK
ex-ante
by law
not applicable
ex-ante
by law
Legal form
Risks
Regulatory
framework
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*
Orange colour: additional requirements on top of IORP Directive
OFP / ASSEP
(België/Lux)
Positioning Dutch IORP vehicles *
Pensioenfonds
PPI
(API Fase I)
MOPF
(API Fase II)
OFP / ASSEP
(België/Lux)
Management
composition
employers /
employees
flexible
employers /
employees
flexible +
social comite
Ownership /
founders
employers /
employees
flexible
Employers /
employees
flexible
“flexible”
(Stichting)
flexible
“flexible”
(Stichting)
flexible
Schemes
all
“all”
(NL: no DB)
all
all
Activities
limited
(domein)
flexible
limited
(only NL)
flexible
flexible
forbidden
flexible
flexible
Ring-fencing
forbidden
optional
mandatory
optional
Financing
requirements
FTK
not applicable
FTK
IORP Dir
ex-ante
by law
not applicable
ex-ante
by law
ex-post/ante
discretionary
Legal form
Risks
Regulatory
framework
*
21IORP Directive
Orange colour: additional requirements on top of
Positioning The Netherlands in the European
2nd pillar oocupational pension market
 Traditionally very well-positioned (broad knowledge, long tradition, size
and depth of the market, experienced providers)
 Lack of efficient cross-border IORP vehicle
 PPI and MOPF vehicle in Parliament; hopefully to become available
in Q2/2010
 Phase III API of key importance for “Nederland Pensioenland”
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Agenda
• The IORP* Directive - some basics
• IORP Market developments
• The Netherlands – PPI, MOPF & API
• Questions & Discussions
23
IORPs*: Institutions for Occupational Retirement Provision
Hewitt Associates
Pan-European Pensions Team
Tel + 31.88.100.6461
Mobile + 31.6.34736.273
Email
[email protected]
[email protected]
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European Pension Summit – Amsterdam – 11 November 2009
Cross-border European pension funds (IORPs)
The positioning of The Netherlands in the emerging
European pension market
Jacqueline Lommen
To protect the confidential and proprietary information included in this material, it may not
be disclosed or provided to any third parties without the approval of Hewitt Associates LLC.