Cross-border European pension funds (IORPs) The positioning of The Netherlands in the emerging European pension market

1. European Pension Summit – Amsterdam – 11 November 2009 Cross-border European pension funds (IORPs)The positioning of The Netherlands in the emergingEuropean pension market Jacqueline Lommen

2. Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussion 2 IORPs*: Institutions for Occupational Retirement Provision

3. Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussion IORPs*: Institutions for Occupational Retirement Provision

4. European Pensions Directive – state of affairs • IORP Directive (2003/41/EC) has been issued in 2003 • Implemented in 2005 – 2007 • All EEA30 member states have IORPs in place • 30+ different IORP vehicles • Circa 10,000 IORPs • Circa 100 cross-border IORPs

5. IORPs: Pension institution vs. schemes IORP Directive IORP* Pensioninstitution (financing vehicle, Legal entity) Pensionscheme A Pensionscheme B Pensionscheme C “Single lead supervisor” Regulated by the social & labour law of the country of origin of the pension scheme(s) (“Host countries”) Regulated by the (financial) regulation of the country of domicile of the pension institution (“Home country”) IORP*: Institution for Occupational Retirement Provision

6. IORPs: Pension vs. Asset vs. Risk pooling Risk pooling Company A Local company / local subsidiary UK NL BE Pension institution Pension assets Investment portfolio Pension pooling (IORP) Asset pooling (UCITS)

7. Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussions IORPs*: Institutions for Occupational Retirement Provision

8. IORPs meeting market needs Members CFO / CRO Flexibility: maintain the local scheme specifics e.g. format (DC/DB, indexation), financing (funding level, contributions), solidarity (ring-fencing), etc. Own identity: maintain governance (social committee), Information (language), etc. Reduced operational risks More grip and control (IFRS, compliance, IORP2) • Simplified governance • Reduced internal management time • Improved operational oversight • Integral risk management Efficiency gains (economies of scale) • Investment performance enhancement • Consistent administration hub(s) • Better access to top quality resources • Fewer providers and interfaces • Lower regulatory burden • Single reporting • Lower / more flexible financing • Tax advantages Cost savings (single European entity) HRM / IEB manager Pension provisions for mobile employees and sr executives Internal branding (common look/feel, equality) Anticipating and digesting M&A transactions; divestitures Framework for implementing change (across Europe)

9. IORPs: a step-by-step approach Pan-euro IORP Pension pooling (IORP) Expats / Sr executives (IORP) Asset pooling Risk pooling IEB Database Benefit audit / pension benchmarking Accounting consolidation Corporate HQ EB manager / global pensions department

10. Real life examples IORPs Early movers (CEIOPS overview): • Existing cross-border cases • Internationally mobile employees and senior executives Multinational companies: • Combining 2 or more existing local pension schemes or IORPs, stepwise • Creating new single pan-European or regional (DC) pension platform • M&A: consolidation into group / anticipating and digesting divestitures Financial Service Providers: • IORP subsidiaries of financial services providers • New markets, product development

11. IORP Location - Regional clusters • Ireland: • Anglo-Saxon region (UK, US) • contract law / trustees • DC focus • asset pooling focus • ????: • East-European region • DC focus • admin hubs • uniform DC schemes • Belgium • Continental European region • DB / DC • integral pension offering • checks & balances governance • Liechtenstein ??: • German-speaking (DE, CH, AT, IT, SCAN) • DB focus • integral pension offering • “rules-based” • “insurance”culture • Luxembourg: • Broad regional base • DB / DC • asset pooling focus • corporate control • financial service providers

12. Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussions IORPs*: Institutions for Occupational Retirement Provision

13. Algemene PensioenInstelling (API): 3 phases • change existing IORP vehicle (?) • Pension Law (“Pw”) (?) • Ministry of Social Affairs (?) • broad scope • target group: local and foreign mutinationals Phase III API Algemene PensioenInstelling • change existing IORP vehicle (“pensioenfonds”) • Pension Law (“Pw”) • Ministry of Social Affairs • strict and limited scope • target group: Dutch multinationals Multi-OPF multi Ondernemings-PensioenFonds Phase II PPIPremie Pensioen- Instelling • new Dutch IORP vehicle • Financial Law (“Wft”) • Ministery of Finance • strict and limited scope • target group: foreign multinationals Phase I

14. Different IORP vehicles – selection criteria Funding requirements: • Size of technical provisions ánd security mechanisms • Flexibility of funding Governance: • Founders, legal form, board composition, social committees • Compliance regulation Scope: • Kind of schemes, risk-bearing, outsourcing, clients, etc. • Ring-fencing • Investment restrictions Other: • Support authorities • Discretionary powers supervisor

15. IORPs - technical provisions differ considerably Source: CEIOPS: “Survey on fully funded, technical provisions and security mechanisms in the European occupational pension sector”, 4/2008

16. IORPs financial requirements Sponsor covenant Protection institution Security mechanisms Balance sheet IORP Additional assets Solvency buffers / subordinated loans Regulatory own funds Additional assets 105% Fully funded Assets Technical provisions 100%

17. Positioning Dutch IORP vehicles

18. Positioning Dutch IORP vehicles

19. Positioning Dutch IORP vehicles

20. Positioning Dutch IORP vehicles * * Orange colour: additional requirements on top of IORP Directive

21. Positioning Dutch IORP vehicles * * Orange colour: additional requirements on top of IORP Directive

22. Positioning The Netherlands in the European 2nd pillar oocupational pension market • Traditionally very well-positioned (broad knowledge, long tradition, size and depth of the market, experienced providers) • Lack of efficient cross-border IORP vehicle • PPI and MOPF vehicle in Parliament; hopefully to become available in Q2/2010 • Phase III API of key importance for “Nederland Pensioenland”

23. Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussions IORPs*: Institutions for Occupational Retirement Provision

24. Hewitt Associates Pan-European Pensions Team Tel + 31.88.100.6461 Mobile + 31.6.34736.273 Email Jacqueline.Lommen@Hewitt.com Paul.Bonser@Hewitt.com

25. European Pension Summit – Amsterdam – 11 November 2009 Cross-border European pension funds (IORPs)The positioning of The Netherlands in the emergingEuropean pension market Jacqueline Lommen