Rules For Sector Schemes And Insurers Hamper Innovation, Says Lawyer

Regulatory restrictions between industry-wide pension funds and insurers in the Netherlands should be abolished as they limit innovation, a pensions lawyer has argued.

René Maatman, partner at law firm De Brauw Blackstone Westbroek, said the separation of competences between the two kinds of organisation would not be needed if the requirement for employers to participate in an industry-wide scheme was replaced with mandatory pension contracts.

Currently, the roles of pension funds and insurers are legally separate in order to prevent mandatory industry-wide schemes competing with insurers on additional products and activities.

In an interview with IPE’s Dutch sister publication Pensioen Pro, Maatman argued that participants would benefit if the legal boundaries were removed “as the separation was only meant to prevent conflicts between pension funds and insurers”.

“Insurers or their general pension funds [APFs] are keen to implement arrangements for industry-wide schemes, but can’t compete because of mandatory participation,” said Maatman, who is also a professor of asset management and pension issues at Nijmegen’s Radboud University.

Mandatory participation should remain, Maatman said, “because it is a valuable thing, as it ensures that most working people accrue a pension”.

“But this goal could also be achieved by shifting the mandatory participation from the sector scheme to a pensions contract separate from the pension fund, enabling industry-wide pension funds, insurers and APFs to compete for a mandatory pension plan,” he explained. This would mean the social partners, when discussing pension arrangements, would have more options for mandatory pension arrangements, including insurance companies and APFs.

The lawyer argued that, without the requirement to join a sector scheme, the industry-wide pension funds could implement other pension offerings, which could in turn make consolidation easier and cheaper.

However, Maatman said he didn’t expect the social partners to prompt a major switch from pension funds to insurers once they had the option. “They won’t just leave if they are happy with their scheme,” he said. 

Maatman claimed that, under the current arrangements, “pension funds tend to put innovations on ice out of fear that the insurers will dispute them”.

He cited arrangements for contributions outside of tax-friendly pension accrual, and the right for pension funds’ members to shop around for options for defined contribution savings at retirement.

He also highlighted the fact that sector schemes currently cannot offer ring-fenced compartments for collective pensions accrual, as is the case for APFs, pension consolidation vehicles typically offered by insurance companies.