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Building pensions for the future

What the Dutch can learn from other countries?

Johan van Egmond

European Pensions Netherlands Summit:

Light at the end

of the tunnel

11 November 2009

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Agenda

1. Company pensions in crisis

2. Dealing with DB

i. Risk-sharing – learning from the Dutch

ii. De-risking – learning from the UK

iii. Total Retirement Outsourcing – learning from the US

3. Dealing with DC

i. Contributions – learning from the Australians

ii. Investment behaviour – learning from the Germans

iii. Education and communication – learning from the UK

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Company pensions in crisis

• DB as well as DC plans face severe times

Impact DB liabilities on balance sheets (IFRS accounting)

Coverage ratios DB plans below requirements

• DC contributions (too) low• Asset growth in DC plans insufficient

• Multinational organization faced with country differences, which poses additional challenges

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500.000,00

700.000,00

900.000,00

1.100.000,00

1.300.000,00

1.500.000,00

1999 2001 2002 2004 2005 2006 2008 2009 2010

$ m

ln

Liabilities

Assets

Crisis Underfunded pension funds in the US

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Crisis Recovery times 410(k) account balances

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Contributions

Pay outs

Investment Policy

Dealing with DB Risk-sharing: learning from the Dutch

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InsuranceCompany

Sponsoring corporation

Pension Fund

Active Pension Fund Members

Passive Pension Fund Members

Buy-in

InsuranceCompany

Sponsoring corporation

Pension Fund

Active Pension Fund Members

Retired Pension Fund Members

Buy-out

Risks

Deferred Pension Fund Members

Retired Pension Fund Members

BenefitsBenefitsBenefits

Be

ne

fits

Contribution

Bu

y-ou

t p

rice

Contribution

Bu

y in p

rice

Dealing with DB De-risking: learning from the UK

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Dealing with DBTotel Retirement Outsourcing: Learning from the US

TRO Provider

Sponsoring corporation

Pension Fund

ReturnPortfolio

Matching Portfolio:

Buy-in

Benefits

Contribution

TRO Services

TRO Services

Insurance Provider

Insurance

Policy

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Dealing with DCContributions

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Superannuation: learning from the Australian

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Dealing with DCInvestment behaviour: learning from the Germans

0

0,2

0,4

0,6

0,8

1

1,2

Other

Cash

Bonds

Eq

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Life cycle strategies / Hedging of risks: learning from DB

Life Cycle

Equities

Money Market

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Dealing with DCEducation: learning from the UK

‘Good money sense needs to be as much part of people’s lives in the twenty first century as healthy eating and keeping fit.’

‘The UK requires a Money Guidance service that is ‘impartial and on the user’s side; available to all; preventative rather than just for those in crisis; supportive and coaching in style; and delivered in an environment not linked directly to a product sale.’

From: Governmental working group Generic Financial Advice, chaired by Otto Thoresen (CEO AEGON UK), March 2008

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Remove investment related risk

Rem

ove

act

uar

ial

risk

Index Based Mortality Swaps

Full Buy Out

Open DB Plan

Buy In

Full Longevity Risk Transfer

Cash Flow MatchingDuration Overlays

Inflation Overlays

Summary: dealing with DBFind the appropriate solutions

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Summary: dealing with DBPlanning your way out of the financial crisis

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Summary: dealing with DCFind the appropriate solutions

• Building pensions for the future

• Making “promises” you can keep

• …save more auto enrolment, behavourial finance

• …invest better life cycles, guarantees

• …plan dissavings phase allignment saving and dissaving

• …understand communication and education

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AEGON Global Pensions

Whitepapers:

“Planning your way out of the financial crisis” (2009)

“Making promises you can keep – Building pensions for the future” (2009)

www.aegonglobalpensions.com

Global Pensions Solutions:

johan.vanegmond@aegon.com

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Thank you

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cost indications in this presentation are for information purposes only. AEGON Global Pensions, its members and any of their affiliates or employees do not guarantee, warrant or represent the accuracy or

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