The text of the new rules for the Netherlands’ pension transition leaves pension funds searching for clarity on the matter of transitioning to the new defined contribution system or, instead, grandfathering accruals.

The crux of the situation revolves around the role of social partners and how to deal with some assenting to the transition while others would or could not, and where that would leave pension funds.

In the new laws, pension funds are not permitted to independently decide whether or not to transition to the new system—it can only do so when social partners request the change. This could be problematic if a company is no longer operational.

In the case that a social partner is only responsible for one arrangement and chose not to transition and other social partners did want to transition, the pension funds would face a dilemma of alienating either group depending on what decision it makes.

Reiniera van der Feltz, a trustee at SBZ Pensioen puts the situation in other words: “Theoretically, we could end up in a situation in which the transition doesn’t happen, even if 90% of our members want to make the transition.”

Pensioenfonds PGB has put forward the solution that if a certain percentage of members agree to transition, that the pension fund in question should be given the ability to make the ultimate decision to move the fund to the new scheme. “This way, it will be prevented that a large number of members and accruals would be grandfathered involuntarily,” says PGB. If the government doesn’t find this approach acceptable, PGB says funds could make individual binding agreements on the transition, which would effectively enable part of the capital of a fund to be grandfathered in.

SBZ Pensioen’s van der Feltz thinks pension funds should have more say in the transition, and that it is “quite strange” that social partners “are put in charge of everything.”

Source: https://www.ipe.com/news/hybrid-pension-funds-want-clarity-on-pension-transition/10059963.article