Dutch Pensions Continue to Dwindle from Consolidation

The consolidation trend in the Netherlands’ pension sector is causing the number of Dutch pensions to dwindle from more than 1,000 20 years ago to just 268 today, according to De Nederlandsche Bank (DNB), the central bank of the Netherlands.

 DNB said the steady decline brought the number of pension plans in the country from 1,060 in 1997, to 713 in 2007, to 268 in 2017. And that number could fall below 200 next year, as another 45 pension funds have already notified the central bank that they plan to liquidate. 

The sharp decline mostly involves company pension funds, which have fallen by approximately 70% over the past 10 years to 192 as of June 30, from 605 at the end of 2007. Meanwhile, over the same time period, the number of industry-wide pension funds fell by about 40%, to 59 from 96.

The bank said that pension funds that do not continue independently can decide to transfer their accumulated assets and liabilities to another pension provider, or to merge with another pension fund. Other pension providers include pension funds, general pension funds, premium pension institutions, insurers, and foreign pension institutions.

Industry-wide pension funds and general pension funds in particular took over the entitlements from pension funds that ceased operations, according to DNB. Before the introduction of the general pension fund vehicle, most accrued benefit transfers from liquidating and merging pension funds were to insurers and industry-wide pension funds.

The bank also said that the decision by pension funds to liquidate or merge are mostly driven by a host of multiple converging trends. These include the rising cost of pension administration, increased tightening of statutory requirements, difficulty finding suitable board members, the fund’s financial position or demographic composition, and developments at the employer, such as mergers, company failures, or pension adjustments. Many pensions also decided that consolidation could also help to achieve economies of scale.  

 “We expect pension funds to consider their sustainability and develop a vision and strategy for the future,” said DNB. “The fact that the future of the sector is as yet unclear emphasizes the importance for pension funds to have a vision and strategy in place, and to be able to anticipate changes to the system.”

The bank said that earlier this year, it identified a group of 22 pension funds as highly vulnerable.

“We have requested these pension funds to draw up a plan for the future, indicating if and how they intend to address their vulnerabilities or how they intend to resolve their activities in an orderly fashion.”