Presentatie Pensioenwereld bijeenkomst...2 Amonis 1.9 3 Fonds de Pension KBC 1.9 4 J&J Pension Fund 1.9 5 Elgabel 1.8 6 BP Pensioenfonds 1.7 7 Fonds de Pension Metal 1.4 8 Ogeo Fund

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De Pensioenwereld Bijeen(komst) Amstelveen, 28 March 2019

(komst)


With you today

Pieter KiveronDirector

Lead Pensions

KPMG NL

Andrew ColesHead Pensions Practice

KPMG UK

Susanne JungblutDirector

Deal Advisory –

Pensions

KPMG DE

Muriel LejourDirector,

Fin_Risk_Management

KPMG BE

Bert KempenDirector

Strategy & Operations

KPMG NL


Agenda

Belgium

Muriel Lejour

Market impact of

IORP II

Germany

Susanne Jungblut

Adding DC

to the menu

United Kingdom

Andrew Coles

Design

contemplations

The Netherlands

Pieter Kiveron

Setting the

scene

Panel

Discussion

Setting the sceneDe Pensioenwereld Bijeen(komst)

Pieter Kiveron

—

Amstelveen, 28 March 2019


Diversified landscape

Source: OECD Pension-Market-in-Focus-2018

BE DE NL UK

Direktzusage

Insurer

IORP

NEST

Pension fund

Pensionskasse

PPI

Unterstützungskasse

Total investments of funded and private pension arrangements

(2017, Euro, x millions) EUR GDP

Belgium 34,000 7.8%

Germany 226,000 7,9%

The Netherlands 1,357,000 184.2%

United Kingdom 2,500,000 105.3%

Retirement age current planned

Belgium 65 67 (2030)

Germany65 born <1948

65 + 7 months67 (born >1964)

The Netherlands 66,33 | 68 67,25 (2024) | ..

United Kingdom 65 66 (2020)


Diversified landscape

Source: OECD Pensions at a Glance 2018


Diversified landscapeCountry Freedom of choice in decumulation phase Financial stimuli

Belgium Lump-sum or Annuity Fiscal treatment of the lump-sum is advantageous

Germany Depending on underlying pension plan and on

its financing vehicle: life-long annuity, lump-

sum or annual instalments

Lump-sum payment is the least tax-effective form of

payment; annuities and annual instalments are

treated identically for tax purposes

United Kingdom Lump-sum, Gradually or Lifelong 25% is tax-exempt, the excess at marginal tax rate

The Netherlands ‒ Lifelong

‒ Lump-sum only with very little pensions

‒ Early and postponed retirement possible

‒ Variation in time possible

Actuarial neutral conversion, effect of income-

related schemes and marginal tax burden looks

limited

Source: Netspar Paper 'Keuzevrijheid in de uitkeringsfase: internationale ervaringen', juni 2018, Marcel lever, Eduard Ponds, Rik Dillingh, Ralph Stevens


Paralysed by analysiso Labour market: increased workforce mobility

o Labour market: self-employed entrepreneurs, crowd work, …

o Demographic change

o Pension underfunding, persistent due to low interest rates and

volatile financial markets

o Accounting standards (towards market-based validations)

o Regulatory burden

o Uncertainty regarding increased longevity

= drivers for DB to DC


Hybrid

DB iDC

DB iDC

DB iDC CDC?

CDC

DB iDC (401K)

iDC DB

The way forwardBelgium

Germany

United

Kingdom

USA

CDC?


Mirroring the labour market

multiple generations global competition different professions nudging

Belgium – Market impact of IORP II

De Pensioenwereld Bijeen(komst)

Muriel Lejour

—



Belgium in a nutshell

3 languages

― French

― Dutch

― German

Group insurer Pension funds

Number 45 195

Provision 73,5 billion (EUR) 27,3 billion (EUR)

Top 10 pension fundsAssets

Bn EUR

1 ExxonMobil OFP 3.3

2 Amonis 1.9

3 Fonds de Pension KBC 1.9

4 J&J Pension Fund 1.9

5 Elgabel 1.8

6 BP Pensioenfonds 1.7

7 Fonds de Pension Metal 1.4

8 Ogeo Fund 1.2

9 Nokia Bell Pensioenfonds 1.2

10 Pensiobel 1

Top 10 insurance companiesMarket

share

1 AG Insurance 21%

2 AXA Belgium 12%

3 KBC Assurances 9 %

4 Ethias 9%

5 Belfius Insurance 6%

6 P&V Assurances 6%

7 Allianz Benelux 5%

8 Baloise Belgium 5%

9 Argenta Assurances S.A. 3%

10 Delta Lloyd Life 3%

3 communities

― French

― Flemish

― German

3 regions

― Wallonia

― Flanders

― Brussels-Capital

11 million

inhabitants

Wallonia

Flanders

Brussels-Capital

BELGIUM

70% of the employees have a 2nd pillar pension through a group insurance.


K E Y F U N C T I O N S – I O R P I I

FSMAExternal

auditorDPO

Administration

council

Internal

auditor

Compliance

function

Risk

management

function

Actuarial

function

K E Y F U N C T I O N S – AC T U AL S I T U AT I O N

FSMAExternal

auditor

Administration

council

Compliance

function

Internal

auditor

Governance model IORP II

Appointed

actuary


Focus on 7 aspects

1. Provisioning (technical provisions)

2. ALM

3. Investments (especially derivatives,..)

4. Management of the liquidity and concentration risks

5. Management of the operational risks

- IT

- Data flow

- Outsourcing,…

6. Insurance or mechanisms to reduce the risk

7. ESG

Risk function IORP II

Belgian Pension funds are awaiting for more guidance coming from FSMA

Own Risk

Assessment

(ORA)


ESG and IORP IIInvestments taking into account three non financial dimensions

Environment Society Governance

IORP II Directive short-lived

— Included in the SIP

— Risk function has to examine the ESG investments (part of the ORA)

— Affiliates will receive information on the ESG

— The transparency report (Pension Act) has to encompass the ESG

Stress test 2019 questionnaire on ESG

? ? ?


― With IORP II we see opportunity for multi-employer pension funds

― However, pan European pension funds will remain embryonic

Consequences of IORP IIPAN European Pension Fund Multi-employer Pension Fund

20 IORP’s active in 13 countries

First pillar Sector plan Self employed Multi-employer

(with a link)

Multi-employer

(without a link)

Single

employer

% number of

pension funds% of balance

total

% number of

affiliates


Supervision Economic developmentsFinancial reporting

HR toolOutsourcing MarketFlexibility

Trends in pensions

Internal

capabilities

DPO

Risk function

Perception pension

is for old days

Modernization

Attractiveness

DB plans

DC plans

Bonus plans

Reflex plans

Providers

Complexity

Unclear

framework

Detailed reporting

supervision

ESG return

Balance sheet

impact

Small pension

funds

Large pension

funds

Germany - AddingDC to the menu


Susanne Jungblut

—



AgendaGerman Pensions – Adding DC to the menu

1 Retirement income in Germany

2 Typical design of German pension plans

3 Company pensions advancement act

a Reasons for its introduction

b Main contents

c Current status of implementation


3 Pillar systemRetirement Income in Germany

Co

mpa

ny

Pe

nsio

ns

So

cia

l

Se

cu

rity

Co

mp

an

y

Pen

sio

ns

Pri

va

te

Sa

vin

gs

Total retirement income …

… is based on 3 pillars



Replacement ratio from social security (before tax)

Source: Wikipedia, „Standardrentenniveau“


So

cia

l

Se

cu

rity


Co

mp

an

y

Pen

sio

ns

Pri

va

te

Sa

vin

gs


… is based on 2 ½ pillars



25%

30%

35%

40%

45%

50%

55%

60%

2001 2003 2005 2007 2009 2011

Co

ve

rag

e

Verbreitung nach Betriebsstätten Verbreitung nach ArbeitnehmernEmployers with supplementary pension plans Employees with supplementary pension plans

Source: Optimierungsmöglichkeit bei den Förderregelungen der betrieblichen Altersvorsorge; S.35; D.Kiesewetter; BMGS(2005); BMAS(2008); BMAS(2012a)


Pri

va

te

Sa

vin

gs

Co

mp

an

y

Pe

ns

ion

s



So

cia

l

Se

cu

rity

… is based on 3 cracking pillars


German funding vehiclesTypical Design of German Pension Plans

S E T U P U P O F O C C U P A T I O N A L P E N S I O N S

Direct pension promise

(book reserved)Support fund Direct insurancePensionskasse Pension fund

Matching employer

contribution

Employee contribution

(salary deferral)

Employer

contribution

Insurance-type plansNon-insurance type plans

Direct pension

promiseIndirect pension promise

With external

asset backing

Without external

asset backingReinsured Traditional

Reinsu-

rance

Capital

market


Distribution of German pension plan assetsTypical Design of German Pension Plans

50% 27%6.3% 10.7% 6%

Source: Schwind J. (2018): Die Deckungsmittel der betrieblichen Altersversorgung in 2016, in: Betriebliche Altersversorgung, Heft 4/2018, S. 309f.

S E T U P U P O F O C C U P A T I O N A L P E N S I O N S


(book reserved)Support fund Direct insurancePensionskasse Pension fund

Insurance-type plansNon-insurance type plans

Direct pension

promiseIndirect pension promise

Matching employer

contribution

Employee contribution

(salary deferral)

Employer

contribution


German Defined Contribution type planTypical Design of German Pension Plans

Contribution


Support fund

Insured solution

Top-up from interest

accrual

Lump sum

or

annual instalments

Minimum guarantee

Total benefitContributions Typically paid asInvestment

Annuity


Company Pensions Advancement Act

Background

Clear need for an improved coverage

through company pensions

Analysis of main obstacles and alternative

approaches

Company Pensions Advancement Act came

into force on 1 January 2018



Special subsidy for pension plans covering low-income earners

Improved tax limits for direct insurance, pensionskasse and pension fund

Employer subsidy in case of salary deferral

Introduction of opting-out systems

Introduction of a pure defined contribution scheme

M A I N C O N T E N T S



At the moment, the future

development of the German

company pensions market and

of the new defined contribution

scheme is not predictable.

— Until today, tariff agreements on a pure defined contribution

plan have not been concluded

— Especially big and bigger middle-sized companies are quite

satisfied with their current pension schemes

— Smaller companies are waiting for the first tariff agreement

— Potential providers have set up structures for organizing a

defined contribution plan

— First defined contribution plans are expected in 2020

UK – Design contemplations


Andrew Coles

—



An introAndrew Coles

UK Head of KPMG’s Pension Practice

Advise global companies on pensions strategy and M&A

Lead a team of 450 in the UK covering

― Advising companies

― Advising trustees

― Defined Contribution

― Defined Benefit

― Large

― Small

Objective

To give a flavour of the trends in the UK to see what the Dutch could take, as they go through their own journey.

But also to learn from the Dutch system, as the UK considers Collective DC!

Glasgow

Team of 25

Manchester

Team of 70

Leeds

Team of 60

Birmingham

Team of 100

London

Team of 160

Reading/Bristol

Team of 60


The recent UK trends

State benefit

Earnings related

Plus

Fixed amount

Defined Benefit

66% of salary

over 40 year

working life

THE PAST THE FUTURE

Fixed State

benefit

Individual

Defined

Contribution


So what’s going on with DB?

Defined

Benefit

Political pressure to separate health of

pension ‘promise’ with health of sponsor

No more build up of benefits

Trend to de risk assets

Regulator code on long term planning –

comply or explain

Trend towards ‘self sufficiency’ or

insurance / settlement

Drive for efficient strategies

Pension

Protection

Fund

20

billion pa


‘ A u t o e n r o l m e n t ’ o r ‘ s o f t c o m p u l s i o n ’

But what about DC ?A start but not enough so

we need engagement

% of earning

above £6,136

and below

£50,000

employer

employee


Defined

benefit

transfers

@say 25:1

Flexibility is attractive

Tax free cash

25%

Taxable cash Annuity

DC


But it’s about workplace savings – creating a savings culture

Pensions ISA LISA

Tax deductable in

Employer & employee

£40k max

Available from 55

Taxable out

Tax free 25%

Tax free roll up

From taxed income

No age limit

£20k pa max

Employee only

Tax free roll up

From taxed income

Age 18-40

£4k pa max

25% government top up

Employee only

Tax free roll up

Individual Savings Account Lifetime ISAPension


Welcome to the digital world

Aviva My MoneyAon – Supporting members

throughout their lifetimeStandard Life’s mobile app

Zurich’s ‘Picture This’ tool L&G video benefit statements LifeSight’s ageOmeter (MT only)


……. and analytics


Are we going full circle?

Defined Benefit

Defined Contribution

Collective DC


So some conclusions

Especially in accumulation

Need for encouragement

– nudge behaviours

It’s a partnership –employer and

employee

DC or CDC is the future

DB is a legacy benefit

Panel discussion

Moderator: Bert Kempen


Statement – United KingdomClosed DB pension funds in the UK form a liability for employers. Defined Contribution plans have been

made more attractive through flexibility and some plan members will transfer their accrued DB benefits

to their DC scheme with advice.

De overheid zou moeten voorkomen dat binnen het DB opgebouwde kapitaal

wordt ingebracht in DC regelingen

The Dutch legislator should prevent transfer of benefits from DB to DC



A. Agree B. Disagree

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A.

B.

Agree

Disagree

37.6%

62.4%




Statement – Belgium

Belgium DC schemes have a minimum guaranteed investment return on premiums paid. This

safeguards plan members for negative returns.

In Nederland moeten we dergelijke garanties voorkomen omdat dit een beperking oplevert op

beleggingsrendementen

In the Netherlands, we should avoid these kind of guarantees, as they have a

negative impact on investment yields.


In the Netherlands, we should avoid these kind of guarantees, as they have a negative impact on investment yields.





In the Netherlands, we should avoid these kind of guarantees, as they have a negative impact on investment yields.


A.

B.

Agree

Disagree

78.7%

21.3%




Statement – Germany Pragmatic German initiatives aiming on (future) labour market issues as well as a gradually rising

pension age to 67 into 2029, focus on elderly employees. Examples are long term savings account

(‘Zeitwertkonten’), partial retirement and production lines geared to older employees.

Pensioenhervorming alleen is onvoldoende om de problematiek omtrent stijgende pensioenleeftijd aan te

pakken

Pension re-design is by far not enough to tackle rising retirement age issues









A.

B.

Agree

Disagree

81.2%

18.8%




At the point of retirement, plan members in the United Kingdom are allowed to choose up to 100%

lump-sum payment of their pension capital.

De voorgenomen maatregel om afkoop op pensioendatum te beperken tot 10% is te beperkend

The intended measure to limit transfer of pension up to 10% as a lump-sum

payment is too restrictive

Statement – United Kingdom


The intended measure to limit transfer of pension up to 10% as a lump-sum payment is too restrictive





The intended measure to limit transfer of pension up to 10% as a lump-sum payment is too restrictive


A.

B.

Agree

Disagree

55.3%

44.7%




Statement – Belgium

Belgium, as other countries, take decisions on pension reforms. Many (tend to) move towards individual

Defined Contribution (iDC). In Belgium, this becomes part of Benefits-on-Demand programs.

Beschikbare premieregeling (iDC) als onderdeel van Benefits on Demand zou een goed voorbeeld voor

Nederland zijn

iDC as part of Benefits on Demand can serve as an example for the Netherlands









A.

B.

Agree

Disagree

52.6%

47.4%




Statement – Germany German employers can choose from multiple pension vehicles to provide employees with occupational

pension arrangements. Over 50% have chosen for internally managed arrangements (book

reserve/contractual trust arrangement) next to insured solutions, pension funds. Now, Individual and/ or

Collective Defined Contributions has been added to their scope.

De flexibiliteit en keuzes voor Duitse werkgevers bij het opzetten van bedrijfspensioenregelingen zouden

een voorbeeld moeten zijn voor de Nederlandse gediversifieerde arbeidsmarkt.

The German flexibility and choices in setting up occupational pension arrangements

should be an example for the Dutch and their diversified labour market.


The German flexibility and choices in setting up occupational pension arrangements should be an example for the Dutch and their diversified labor market.





The German flexibility and choices in setting up occupational pension arrangements should be an example for the Dutch and their diversified labor market.


A.

B.

Agree

Disagree

30.5%

69.5%




B. Belgium C. GermanyA. United Kingdom

The Dutch pension

dikes are broken,

the Netherlands are

flooded, you have

to find shelter

abroad.

B

CA

What is your favourite choice?


What is your favourite choice?A. United Kingdom

B. Belgium

C. Germany

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B. Belgium C. GermanyA. United Kingdom

The Dutch pension

dikes are broken,

the Netherlands are

flooded, you have

to find shelter

abroad.

B

CA







A.

B.

C.

United Kingdom

Belgium

Germany

54.8%

14.0%

31.2%




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Documents

Presentatie Pensioenwereld bijeenkomst...2 Amonis 1.9 3 Fonds de Pension KBC 1.9 4 J&J Pension Fund 1.9 5 Elgabel 1.8 6 BP Pensioenfonds 1.7 7 Fonds de Pension Metal 1.4 8 Ogeo Fund