As the Netherland’s overhaul of its €1.45 trillion ($1.6 trillion) pension sector, Europe’s largest, gathers pace the country’s pension funds must shift from defined benefit to defined contribution.
Asset owners are beginning to adjust their hedging policies and asset mix to prepare for a new world that replaces retirement income promises for members with a different system that bases pension payouts on contributions and investment returns, dependent on the vicissitudes of financial markets.
“Pension funds are really busy with the transition from DB to DC. Everyone is preparing for a different asset mix in the new DC system and beginning to incorporate a different approach to interest rate hedging that has always been a very prominent element of risk management in the Netherlands,” explains Xander den Uyl, somewhat of an identity in the Dutch pension landscape. He is now a trustee at €1 billion Pensioenfonds Recreatie, a pension fund for employees in the Netherland’s recreational sector that is at the forefront of a transition that is being closely watched by governments around the world, mindful of the need to reform their own pension systems as aging populations…
