There were more options than we thought.
Susanne Mulders-de Rooij, former chairman of the board of the Heijmans pension fund, talks about the pension buy-out.
When it became clear that insurance could be in the interests of all stakeholders, we set about calculating different scenarios very intensively. We chose Zwitserleven because they made a very solid impression. During the 'beauty parade' the team that would have to make it happen after the deal, made a very good impression. In the end, Zwitserleven also proved to be strong on the legal front. We look back on the whole process with joy and satisfaction.
How did the board of PF Heijmans decide, back then, to stop the pension fund and to investigate a buy-out?
The Heijmans pension fund had become a closed pension fund in 2013. As a result, it was a shrinking fund. Governance was also geared to this situation. We had a small pensions agency and everything was outsourced. The requirements that the Dutch Central Bank imposes on pension funds in all sorts of areas have increased enormously. This means that, for a small fund, certain activities will no longer be proportional at some point. It is becoming increasingly difficult to continue to comply with all laws and regulations in a way that suits your small fund.
What was the deciding factor for the board to choose Zwitserleven?
It is fair to say that at that time several solid parties were able and willing to make such a deal. Zwitserleven came across as very thorough. During the 'beauty parade' the team that would have to make it happen after the deal, made a very good impression. Zwitserleven’s solvency is excellent and they also offered the best price. In the end, Zwitserleven also proved to be strong on the legal front.
If you look back on the entire process, what is the first thing to come to mind, in one or two words?
Happy and satisfied.
What objectives did the fund have in mind?
The pension fund implemented a final pay scheme without post-indexation. A nominal pension scheme is not very common. Almost all pension funds seek to index-link their pensions. The scheme was first introduced by Heijmans as an excess, on top of the scheme from the industry-wide pension fund for the Construction Industry. Indexation was not agreed on at the time. The fund’s objective was to fulfil the nominal commitment.
How did you experience the entire process with Zwitserleven, from quotation to implementation? And what is it like for the participants in the fund and the employer?
It was an enervating experience. It started with a number of in-depth discussions about what you, as the management, consider important when it comes to the future of your fund and the achievement of your objectives. Transferring pensions to an insurer in the future was an option that we were keen to see in the long term, for example, because it would be easy to implement. In addition, insurers insure nominal pensions, which is in line with our financial objective.
The ALM study at the time showed that there was a real chance of cutbacks in the near future; these scenarios are also becoming apparent today. Insuring was therefore in the interests of our participants because insurers guarantee the pension commitment.
However, in the beginning, which was in 2017, taking out insurance with an insurer was not an option due to market conditions. The interest rates and funding ratio were low, the insurers' buy-out market was thin. That is why we also investigated managing the funds as a General Pension Fund. Because we wanted to be really sure that the insurance market was not an option at that time, and also so we could justify our policy towards the participants and the employer, we did ask for some indications from insurers. These were not so bad after all.
“There were more options than we thought. ”
This intensified our talks with the employer, who would clearly benefit from our choices. When it became clear that insurance could be in the interests of all stakeholders, we set about calculating different scenarios very intensively. We also looked at the partial placement of liabilities and spreading the transfer to an insurer over time. In the end, it was decided to reinsure all liabilities with Zwitserleven at once, in April 2018. The formal group transfer of accrued benefits to Zwitserleven took place in October 2019.
Do you have a tip for pension funds that are planning a buy-out now or in the future?
The management should try to formulate what they want to achieve as clearly as possible, right from the start. And try to really get to the bottom of what may stand in the way of that objective. And continue to communicate with all stakeholders on this subject at all times. At the end of the day, you will be doing this together.