Chemicals giant Dow is to concentrate its European defined contribution (DC) schemes in a Belgium- based cross-border pension fund, starting with its Dutch DC plans. It is to place the Dutch DC plans – with combined assets of €45m and 1,900 participants – with UnitedPensions, the cross-border vehicle of Aon Hewitt. However, Dow’s current closed defined benefit (DB) plan in the Netherlands, comprising €2.5bn of pension assets, will remain with its Dutch pension fund, the company made clear in a newsletter.
Ed d’Hooghe, Dow’s director of human resources and vice chairman of the Dutch scheme, said the firm’s DC scheme in the UK was to be next to join UnitedPensions, to be followed by its DC pension funds in Belgium, France, Germany, Italy and Spain. He made clear the decision was aimed at achieving benefits of scale and costs savings, as well as improving the portability of pensions for staff moving between countries.
Currently, Dow has three DC plans in the Netherlands, two of which are being implemented by a low- cost DC vehicle (PPI), i-PensionSolutions, and the third by Dow Pensioenfonds itself. D’Hooghe indicated that the decision to relocate the Dutch pensions was in part triggered by the PPI contracts expiring and Dow developing plans for European DC arrangements. “After comparing the propositions of Dutch PPIs, we concluded that the international option would be the best.” According to d’Hooghe, UnitedPensions’ life cycle came on top in a survey by consultants Mercer and Milliman. He said that the pan-European pension fund would also be cheaper to run in the longer term after more Dow schemes have joined.
In conformity with Dutch legislation, the Dutch participants of the cross-border scheme will have the choice between fixed and variable benefits after retirement, and will also be entitled to shop around for the best deal. However, Aon Hewitt in Belgium will also offer benefits, Dow made clear.
The company’s Dutch pension fund will continue to independently implement its remaining DB plan. According to its vice chair, it had a sufficient number of active participants and funding of 117.5% as at the end of November. “We want to improve coverage to more than 120% and subsequently start reducing investment risk,” said d’Hooghe. He said that setting up a pan-European DB scheme, as Dupont, BP and ExxonMobil have done, was not a priority for Dow. “This would require a significant transition. As we are satisfied with the current solution, starting a cross-border DB pension fund does not seem to be efficient,” he explained.