The pension transition in practice (Roundtable Fiduciary Management & the Wtp – part 2)

March 13, 2025

_{This report was originally written in Dutch. This is an English translation.}

How is the pension transition going for the frontrunners? What are the differences between the SPR and the FPR? In part 2 of the Round Table ‘Fiduciary Management and the Wtp’, the practical aspects were discussed in greater detail.

By Hans Amesz

This is part 2 of the report. You can read part 1 here. Part 3 will be published on 20 February.

Do we see a difference in the role of the fiduciary manager under the SPR versus the FPR?

Barlage: 'It's going to be different. The fiduciary will now also advise the pension funds per age cohort and per lifecycle, support them in shaping the “building blocks”, and of course report on this. Don't underestimate the fact that the fiduciary manager's reports under the Wtp are going to look very different.'

Mr Albrecht: 'I think that third parties, such as journalists, websites, consultants, etc., are going to take a very critical look at what pension funds promise in the SPR's allocation policy. What is actually being allocated? As a pension fund, you claim to have a certain exposure to business values and protection against interest rate risk. If you cannot live up to this because the investment policy is insufficiently in line with the asset allocation policy, you will be called to account. Soon, all of this will be possible based on public information. In addition to the pension fund and the fiduciary, others will want to make money from things like publicity or by offering supplementary pension products to make up the deficit. The pension fund must deal with this proactively and ensure that you do not make commitments in the allocation policy that you cannot materially fulfil.'

Van Pol: 'Once again, communication is becoming increasingly important. With regard to the SPR, this will be focused on the expected pension, whereby you will not be shown the investments, or only deeply hidden ones. With the FPR, it is different: what you see is what you get, namely your money pot.'

Roskam: 'We must distinguish between board reports and communication to participants. The board reports will look different, both under the SPR and under the FPR. In the communication to the participants, I foresee a difference between SPR and FPR. We know from experience that the FPR is reasonably easy to explain. The SPR is complex, especially under the hood. That must be recognised.'

Fortuyn: 'There will be cohorts that may show extreme differences in returns. That will need to be explained.'

Will more attention be paid to costs and passively cheap solutions in the future?

Albrecht: 'Yes, transparency will make portfolios simpler. The sector is currently pushing innovative investment categories such as hedge funds, illiquid real estate, private equity and private debt, etc., because they earn more than a passive global equity fund. From an investment perspective, there is something to be said for this, despite the costs. However, under the Wtp, it is less about whether we as experts think it is wise, but more about whether the participant understands it. Transparency will ensure that returns from the SPR and the FPR will be compared by outsiders with simple benchmarks. If you deviate greatly from this and also incur high costs, you as a pension fund will be in a defensive position. That is not something you want. What you have to take into account is that it is mainly the smaller pension funds of less than a billion euros that are under pressure from the employer. The employer is really only looking at the costs, and if he thinks they are too high, he will simply pull the plug and go to a general pension fund, for example. In this way, asset managers are indirectly forced to participate in cost reduction and thus simplification. I wonder if, because of economies of scale, fiduciaries will start to specialise in certain parts of the market, like pension administrators, and only choose certain schemes and not all of them.'

Fortuyn: 'We can only be a good fiduciary if we are independent. Our targets do not include internal products. The asset management business is a separate business with its own distribution channel. Simplicity is of course important for a portfolio. But ultimately we have to look at the return after costs. What will provide the highest return at the end of the day? It may of course be the case that certain products have added value in a portfolio despite higher costs. Furthermore, the question is whether the participant can handle being confronted with (large) monthly fluctuations in their pension pot. Then you might be more inclined to absolute return products and you might end up in a corner you don't want to be in right now.'

Roskam: 'It remains our job to build a robust portfolio that also offers protection in scenarios with higher than expected inflation, for example. That brings investment categories such as real estate and infrastructure into the picture, which also ensure diversification. If you throw the baby out with the bathwater just for the sake of the costs, you are not acting properly as a pension fund. At the same time, I do see more pressure on costs arising, but that mainly concerns implementation. We must not forget that we have just had two decades in which a simple combination of shares and government bonds was almost unbeatable. That may be different in the future.'

Roeloffs: 'The costs per pension fund will differ. Funds with strong ESG ambitions will quickly end up with private assets if they want to make an impact. Yes, there is generally a higher price tag attached to that. Costs are not the first criterion in building the best portfolio.'

Fokkelman: 'Communication must focus on all areas of attention, namely return, risk, costs and ESG. If you only communicate about costs, you may draw the wrong conclusions.'

What stood out in the transition of the frontrunners to the new system?

Fokkelman: 'Our own fund transitioned in January. Certain choices were made in the composition of the investment policy. For example, the interest coverage has been reduced somewhat compared to the increased interest coverage in 2024 to protect the funding ratio. Furthermore, there are no longer any investments in inflation-linked bonds and emerging market equities have been reduced somewhat, while emerging market debt and the alternative credit categories have been increased somewhat. The return part of the portfolio has also been given a higher weighting, in line with the higher risk appetite of the participants. These are shifts in emphasis.'

Mr Fortuyn: 'In principle, a transition is not entirely new to us as a fiduciary. What makes it difficult now is that you have to make a transition plan for a fund while not all the details of the future situation are known yet. The board is asked to use its imagination to make progress. Looking back, I can say that the transition went smoothly. The transition of our frontrunners went surprisingly smoothly. Both in the currency market and in the interest rate swap market, liquidity was sufficient on the first trading day of the year.'