Dutch pension funds APG and PGGM said they have completed the initial phase of a joint experiment involving a blockchain application to develop an advanced pension administration system.
The companies said blockchain technology has the potential to significantly improve the services pension funds provide to their plan participants. One of their main goals is to use blockchain to lower participant costs, simplify pension administration, and increase security. In addition, the personal pension data will become more accessible to participants.
“We aim to create the maximum possible value for pension funds and their participants,” Wim Henk Steenpoorte, a member of the APG’s executive board, said in a statement. “By investing in smart applications, such as blockchain, we make our pension administration simpler and cheaper over time.”
The prototype is comparable to a pension administration system shared by all parties, and is controlled by a so-called “smart contract,” which is a set of programmable rules that specify who can view, change, and use the data.
The companies say blockchain technology, which was first developed as an accounting method for bitcoins, makes it possible to store pension information in the nodes of a blockchain network. For example, the nodes are points in a network and can consist of pension providers, employers, and regulators.
“The nodes check the information, execute the programmed pension contracts, and synchronize with each other,” said APG and PGGM in a statement. “This makes the storage of pension information secure, and participants, at the push of a button, can see how much pension they have accrued.”
APG and PGGM said the next step will involve conducting further research with the prototype. “There is still much to learn about blockchain and the opportunities for pensions,” said the companies, adding that they will also hold talks with pension funds, regulators, and information providers about utilizing the new system.
“The first results make us excited and curious to learn and explore even more,” said Paul Boomkamp, a member of PGGM’s executive board. “Ultimately, this experiment has to show that blockchain technology has the potential to manage a policy administration at lower rates.”