 | 0 |
| 1 |
| 1 |
| 1 |
| 1 |
In this issue of Brans Brief:
Until 1 January 2007, on the basis of the Dutch Work and Income (Capacity for Work) Act [Wet werk en inkomen naar arbeidsvermogen, or WIA] it can be the case that partially disabled employees who earned more than the maximum daily salary (2007: €45,017) can be at a disadvantage compared to their situation under the WAO. These negative results in comparison to the WAO are known as WGA shortfalls. As of 1 January 2007, the WIA has been significantly amended so that almost all WGA shortfalls have been removed. This applies to both the shortfall that can exist during the pay-related phase and the shortfall that can occur during the pay supplement phase. In both cases, the shortfall existed for an income above the maximum daily salary. These WGA shortfalls have now been repaired, actually with retroactive effect, because in the formula for the determination of the pay-related and pay supplement benefit the pay in excess of the maximum daily salary is taken into account. The formula for determining the benefit concerned now includes a fraction whereby the maximum daily salary is divided by the uncapped daily salary. The introduction of this fraction means that the above-mentioned WGA shortfalls have been removed. Only in cases where there is a WGA continuation benefit (use of less than 50% of the remaining capacity), or a degree of disability of less than 35% (but above 15%) will there still be a difference between the benefit that would have been received under the WAO and the benefit that the recipient now receives under the WIA. A WGA shortfall can only exist in these cases.
For more information contact: Sandra Bertram.
The implementation of the Pensions Act from 1 January 2007 has given De Nederlandsche Bank (DNB) reason to change the way it carries out its material regulation. In a letter, DNB announced that the process of testing the articles of association and regulations of pension funds is changing. The prevailing legislation also includes legislation on equal treatment. The articles of association and regulations will be tested regularly and integrally on a sample basis, using a risk-oriented and planned approach. The aim of the changed method is to make the material regulation more targeted, effective and efficient.
The articles of association and regulations of the largest pension funds will be tested annually, and those of other pension funds will be tested every two or three years. This does not change the requirement that under the Pensions Act interim changes to the documents must be reported to DNB within two weeks. Under the Pensions and Savings Funds Act, this period was three months.
DNB will assess the urgency of dealing with the articles of association and regulations on the basis of a set of risk indicators. Urgent cases will be given priority (sample testing). The new DNB method takes effect as of 1 January 2007 and applies to articles of association and regulations submitted to DNB from that date.
For more information contact: Harmen Pullen.
In recent years, pension funds have devoted much attention to the matching of liabilities. Currently the main focus has returned to the search for return. Extensive attention has been given to alternative investment categories. Our annual survey shows that around USD 200bn was invested in these alternative categories in 2005.
Alternative investments managed by leading asset managers grew around 20% in 2005 to USD 1.26 trillion, according to a Watson Wyatt survey. From the Global Alternatives Ranking List prepared in combination with Global Alternatives Magazine, it appears that funds of hedge funds (FOHFs) were once again the most popular alternative investment category, followed by real estate and private equity funds of funds. Commodities were a distant fourth. A total of around USD 200bn in new capital went into alternatives in 2005. The pension funds remain the largest source of new money, and the choices they make are different from other types of investors. Real estate remains their favourite alternative category, although FOHFs are rapidly gaining in popularity.
Pensions funds are also increasingly investing in commodities, although in relative terms their holdings are still limited.
Figure 1. Top 15 alternatives managers 2006
No |
Name of parent company |
Country |
Investment |
Global assets |
1 |
RREEF |
US |
Real Estate |
62,2 |
2 |
ING Real Estate |
NL |
Real Estate |
55,6 |
3 |
Hamilton Lane Advisors |
US |
Private equity |
48,8 |
4 |
Man Investments |
UK |
FOHF |
45,8 |
5 |
Morley Fund Management |
UK |
Real Estate |
38,3 |
6 |
AXA Real Estate |
EUR |
Real Estate |
36,6 |
7 |
UBS AG/UBS Global Asset Management |
US |
Real Estate |
30,6 |
8 |
LaSalle Investment Management |
US |
Real Estate |
30,5 |
9 |
JPMorgan Investment Management |
US |
Real Estate |
29,7 |
10 |
Prudential M&G |
UK |
Real Estate |
29,5 |
11 |
Union Bancaire Privee Asset Management |
US |
FOHF |
25,0 |
|
12 | Alternative Investment Solutions |
US |
FOHF |
24,9 |
13 |
Pacific Corporate Group |
US |
Private equity |
23,0 |
14 |
Credit Suisse |
US |
Real Estate |
22,5 |
15 |
Permal Group |
US |
FOHF |
21,3 |
The survey also reveals that RREEF (formerly Deutsche Bank Real Estate) was the largest alternatives asset manager at the end of 2005, with over USD 62bn under management. ING Real Estate is the second-largest, with over USD 55 bn. In commodities, Allianz is the largest with almost USD 14 bn.
For more information contact: Michel Iglesias del Sol.
The Pensions Act and the Financial Testing Framework [Financieel Toetsingskader, or FTK] have been in force since 1 January 2007. Under the FTK, a pension fund must establish the amount of its technical provisions based on ‘expected outgoing cash flows’. The amount of these cash flows must be determined taking account of the ‘foreseeable trend in survival probabilities’. The Actuarial Association [Actuarieel Genootschap, or AG] issued new mortality tables on 7 February. These relate to the 2000–2005 observation period. The ‘standard’ GBM/V 2000–2005 mortality tables show the actually observed mortality in this period. Since no foreseeable trend is included in these tables, they cannot be automatically used to determine the provision for pension liabilities [voorziening pensioenverplichtingen, or VPV] under the FTK.
The AG has however also issued its 2005-2050 forecast table, which is known as a generational table. The 2005–2050 forecast table is actually a combination of mortality tables, from GBM/V 2000–2005 up to GBM/V 2050–2055. A falling trend in the probability of mortality can be seen between successive tables. The mortality chance of someone aged 40 is higher than that of someone who will be 40 years old in ten years' time. A VPV based on the 2005–2050 forecast table therefore contains the ‘foreseeable trend in survival probabilities’ required under the FTK.
Can pension funds therefore now move to the 2005–2050 forecast table en masse? As indicated by the AG in the book accompanying the mortality tables, the chances of mortality are based on the whole population of the Netherlands. The unemployed, chronically sick and those in detention are not participants in pension funds, although they are included in the AG’s general mortality figures. These are mainly groups of people whose life expectancy is less than average. Participants in pension funds therefore in general live longer than the average population. A pension fund has to take account of this as well. This is known as mortality experience.
Since 1997, in its adequacy test, Watson Wyatt has included both a mortality trend and the mortality experience using its “Brans table”. For our clients, moving to the 2005–2050 forecast table with mortality experience will therefore have little effect. Since the chances of mortality have fallen somewhat more sharply in recent years than expected in 1997 – the year when the “Brans table” was created – it is expected that the VPV will rise by approximately 0.5% to 1%.
For more information contact: Richard Meijer.
If you have any questions or remarks concerning this issue of the BransBrief, please let us know.
Contact |
Overzicht actuele berichten |
Watson Wyatt Update Nieuwsbrief overzichtBekijk hier uitgaven van de Watson Wyatt Update Nieuwsbrief. |
Vragen & Opmerkingen |
Ontvang de nieuwsbrief per e-mail |
Copyright 2010 Towers Watson. All rights reserved.
Terms of Use
Privacy Policy
See all locations
Contact us
Request services
