Dutch Pension Buyout Market Ignites

De-risking activity has moved up a gear in the Netherlands. 

Aegon has taken on the assets and liabilities of two Dutch pension funds in one of the first—and largest—buyout deals to date in the Netherlands.

AMF and BFM, pension funds for mineworkers, have transferred the accrued assets of 28,000 members to the life insurer. Aegon has committed to pay benefits until the final wind up of the schemes.

Under the terms of the deal, AMF members’ benefits will increase by 8%, while BFM’s members will receive a 10% uptick. The funds will not merge, they confirmed in a statement.

“As an independent pension fund in the future, financial participants are now better off by moving to an insurer,” said Fer Pfeiffer, president of AMF, on behalf of both funds.

In a letter to members, the pension board explained its decision: “The costs of managing pension entitlements for our members are rising while our assets are decreasing because we need to pay out pension benefits. Therefore, we have less money available to invest. With this transfer to an insurance company, we want to safeguard your pension entitlements both now and in the future.”

Both schemes were more than 100% funded, which is a regulatory requirement in the Netherlands.

Aegon is one of the few players in the Dutch buyout market, which is dominated by insurers.  This latest is the largest deal of its kind in the Netherlands, but with combined assets of just €953 million—€816 million of which is attributed to the AMF fund—the market trails those in the US and UK where “mega-deal” buyouts have shifted billions of dollars and pounds off company balance sheets.

Legal & General, one of the biggest buyout players in the UK and US, announced they would enter the Dutch market last year, but are yet to announce any activity there.

Ian Aley, head of pension risk solutions at Towers Watson, told CIO last year: “In Holland, a number of insurers and reinsurers we speak to have an interest in the Dutch market [for pension risk transfer deals]. But, and this is a massive oversimplification, broadly they see it as the next big market to develop, but it’s not there yet.

“One of the issues for Dutch pension funds is the difference made by longevity assumptions between themselves and insurance companies. In the UK, the two models have more or less merged, but in the Netherlands they’re further apart.”

The deal has been agreed by the funds’ trustee boards but is awaiting final approval from the Dutch Central Bank.

Related content: Mega Buyouts Land in the UK & Canada’s First Mega Pension-Risk Transfer Deal