European Pension Debate 2013
‘One Europe, one pension:
a challenging pentagon’
28 November 2013
CompetenceCenter for
Pension Research

10.15 – 10.45 From Goldilocks to Hansel and Gretel in unknown, dark wood: impact on pension funds - Edin Mujagic
10.45 – 11.15 EU White paper on pensions - Gerry Dietvorst
11.15 – 11.30 Coffee break
11.30 – 12.00 Retirement benefits for mobile employees at HEINEKEN -
Sandra Winstanley
12.00 – 12.30 Pension issues - Gijs van Bussel
12.30 – 13.30 Lunch break
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13.30 – 15.00 Introduction on the topics of the three workshops
1) Eye on pensions: How do employees keep track of their pensions? - René Boekestijn / Eric van Elburg
2) A possible EU-single market for personal pension products – Peter Penzes
3) Pan EU pension solutions - Hans van Meerten
15.00 – 15.05 Transition to workshop location
15.05 – 16.00 3 workshops where the before mentioned topics are discussed and deepened
16.00 – 16.30 Tea break
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16.30 – 17.00 Report from the workshops, conclusions, suggestions and next steps - Pierre Akkermans
17.00 Final remarks and closing of the conference –
Bastiaan Starink
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• High economic growth
• Globalisation
• Innovation
• Free trade
• Lending spree
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• State of flux
• Upside down world
• Rules of thumb/regularities do not seem to apply any more
• Uncertainty
• Typical of a transition period!
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• ‘…and they all lived happily ever after’.
• No reason the future will be as dark as the present situation (Hansel and Gretel found their way out of the dark wood)
• Not as dark, but also not the same as the past
• ‘…and they all lived wealthier ever after’?
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• Lower economic growth
– Demographics
– Innovation
– Lending spree over
• Interest rates
– If Japan-scenario  low long term interest rates
– If higher inflation/higher risk of default  higher long term interest rates
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• Stock prices
‘Expectations of corporate earnings do not seem to explain stock price increases since mid-2012’
(ECB Monthly Bulletin, August 2013)
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The economic and financial world is in transition and the world pension funds are operating in, is profoundly changing. Any investor with medium term / long term view should be aware of this.
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The white paper:
An Agenda for Adequate,
Safe and Sustainable
Pensions
Prof. dr. Gerry Dietvorst
Tilburg University

State
Pension
Not funded
Supplemen- tary pension
Schemes
Funded
Private
Pensions
Funded
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Benefits in 1st pillar almost everywhere dominant
Breakdown of national benefits by pillars
100%
80%
60%
40%
20%
0%
PL TR IT FR FI ES BE PT SE DK CH NL GB
1st pillar 2nd pillar 3rd pillar 2nd and 3rd pillar
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• Link the retirement age with increase in life expectancy
• Restrict access to early retirement and other early exit pathways
• Support longer working lives
• Equalize the pensionable age between men and women
• Support the development of complementary retirement savings to enhance retirement incomes
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put in place a system that is financially sustainable so that the basic purpose of pension systems, namely to deliver adequate retirement incomes and to allow older people to enjoy decent living standards and economic independence, can be achieved”
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• In general: EET in third pillar
• Three categories
1. No deduction for contributions
2. Fixed amount deductible
3. Contributions deductible depending on the pension gap
• Conditions in the pay out phase differ
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• EC is in favor of a “Broader application of the EET-principle within the European Union ”
(The elimination of tax obstacles to the crossborder provision of occupational pensions. Brussels, 19/4/01. Com (2001) 214.
• “ Nevertheless it will be noted that much of the discussion in the Communication applies equally to third pillar pensions and life insurance services.
” o Note that the borders between the second and third pillar are fading o Green paper (7.7.2010 COM(2010)365 final) mentions in a footnote the (my) idea of a Compensating layer!
• The White Paper is more vague at this point but the intention is the same.
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• Philosophy, a concept, a possible approach
• Third pillar (private pension) is a compensating layer o Contributions for private pensions are income deductible if and insofar the first and second pillar are not enough to maintain the standard of living: pension gap
• The deductible amount depends on the income of the individual and of the pension scheme in which he is a participant at that moment o MS are at liberty to
• Adopt the concept
• Create a fiscal framework o No violation of the subsidiarity principle
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• Supports mobile workers / entrepreneurs
• Stimulates individual responsibility
• Contributes to sustainability of the system
• Supports Lisbon and the EU 2020 strategy
• Better balance between the three pillars o Solidarity o Funded / non-funded o What is the best balance
?
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• Pension providers inform participants about the increase of the pension entitlement in the past year (legal obligation)
• The individual tax payer can calculate on the basis of a formula in the Income Tax Act how much he can deduct for his private pension
• GD: advocate of the idea that the tax authorities inform the individual tax payer every year about the contributions he can deduct for his private pension
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• Salary € 50,000
• Pension scheme 2% per year
• € 1 000 per year
• Third pillar 15%: € 7,500
• Deductible € 7,500 minus
€ 7,500 = € 0
• Salary € 50,000
• Pension scheme 1,5% per year
• € 750 per year
• Third pillar 15%: € 7,500
• Deductible: € 7,500 minus € 5,625 = € 1,875
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• To support the concept by advising MS to set up private and occupational pension schemes with tax incentives o Under the same conditions and up to the same level, and o Independent of the way someone participates on the labor market: as an employee or as an entrepreneur o Depending on the pension gap o In combination with a tracking service
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15 minutes coffee break

Retirement benefits for mobile employees

Agenda
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HEINEKEN internationals
Retirement strategy
3 Case Studies Issues and
Challenges
Summary

HEINEKEN | Proud, Independent, Responsible Global Brewer
The world’s most international brewer


No 1 in Europe and No 3 in the world by volume
Operations in over 70 countries globally
Brewing great beers, building great brands
Committed to surprising and exciting consumers everywhere
Long and proud history and heritage
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HEINEKEN | Brewing Great Beers, Building Great Brands
Heineken ® , our flagship brand, is the world’s leading international premium beer
Desperados, Sol, Amstel Premium Pilsener and Strongbow Gold complement our global brand portfolio
Altogether, we have over 250 international, regional, local and specialty beers and ciders in our portfolio
Passion for quality and Innovation are at the heart of how we build great brands and delight our consumers
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HEINEKEN | Truly Global Presence
>165 breweries in over
70 countries
>85,000 employees
>Consolidated Beer
Volume in 2012:
172 million hl
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Global mobility at HEINEKEN
•
•
•
•
HEINEKEN’s Global Mobility Policy is a key management tool to attract, develop and motivate high performing talents in all our markets and to drive personal leadership on a global scale.
Award winning tools and processes
Centralised dedicated team at HQ
Different groups of internationals: commuters; traditional assignees; development assignees; permanent assignees (Global Nomads); localized employees; international graduate programme participants.
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500 mobile employees located all over the world
Heineken Group (incl
HIB, Group Supply)
Western Europe C&E Europe
Host to 60 Expats
Host to 125 Expats
W Europe 204
Host to 61 Expats
Americas
Host to 73 Expats
Africa & ME
Host to 124 Expats
Asia Pacific
Host to 46 Expats
# Moves over the years
350
300
250
200
150
100
50
0
Total
Total 2011
Total 2012
2013
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HEINEKEN “internationals” retirement strategy
Where possible: stay in HOME COUNTRY plan - works for 95% of cases
•
•
When does this approach NOT work?
No home plan
Not allowed to stay in home plan
•
Global Nomads & HQ “international” hires
Around 5% of our internationals fall into one of these groups…but the number is growing
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IRSP (International Retirement Savings Plan)
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
♦
Funded defined contribution plan
Flexible design (DC in; capital out) so that we can make appropriate contributions for participants
Administration and asset management by providers
Investment choice for participants
Security
Established in a tax sheltered jurisdiction (Isle of Man), and thus non-qualified
(in most cases, contributions grossed up by HEINEKEN)
Plus, international death and disability insurance
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Huey
International recruit; no ties to a home or host company
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
Recruited outside the Netherlands, but based at HQ; probably 2-5 years at HQ
HOME country approach not well suited to circumstances and expectations
….but often the only choice….
IRSP – permanent solution? (portability, adequacy, keeping track of benefits, tax…)
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Dewey
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

New hire Global Nomad – international career and no ties to a home country
IRSP is sole source of retirement savings
Adequacy of benefit outcome
Not tax approved so costly relative to local employees … and tax implications when benefits brought back onshore
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Louis
“Promotion” to Global Nomad - has
“outgrown” his home country
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

Legacy – generous Social Security in home country plus supplemental home plan
(without vesting)
Fragmented benefits
Costly to compensate in IRSP
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Summary of challenges and issues
Eligibility criteria
Tax and legislation
Portability Keeping track of benefits
Fragmentation
Equity across groups
Cost allocation

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European Pension Debate
Tilburg University / PwC
Prof. Dr. Gijs M.M. van Bussel
28 November 2013
Leadership • Entrepreneurship • Stewardship info@nyenrode.nl +31 (0)346-291 291 www.nyenrode.nl

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Prof. Dr. Gijs van Bussel (1954)
(Almost) Swiss
• Polaroid
• Organon (AkzoNobel)
• AMP (Tyco)
• NMB/NMS
• Teacher
• Consultant
• Royal Philips (advisor & secretary RemCo, SB)
• Novartis (advisor & secretary RemCo, BoD, HR M&A).
• Combination Nyenrode/PwC
• Member of the Association of Heads of Rewards of Dutch listed companies
• PhD Twente University; subject Pension
(Blueprint for a coherent pension system)

Association survey:
Shell
Heineken
AkzoNobel
ASML
Aegon
Ahold
ABN Amro
DSM
KPN
Unilever
Rabo
Philips
ING
Reed Elsevier
And the winner is
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50

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Contribution
E
Pay-out
T
E = exempt
T = taxed
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Contribution
E
Pay-out
T
E = exempt
T = taxed
Accrual phase
Contribution
E
Return
E
Retirement phase
Pension
Payment
T
Return
E
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Source: Peter Schonewille
INVESTMENT&PENSIONS EUROPE , February 2009
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• Gross up of contributions/accruals
• Tax Qualified Plans (Pension Capital vs lifetime pension payment)
• Pension Capital transfer between countries
• Disability Pension
• Different social security systems
• Governance
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1 hour lunch break

European Pension
Debate
Tilburg November 28 th
2013
Rene Boekestijn (Syntrus Achmea)
Eric van Elburg (MN)

Introducing an overview of accumulated pension entitlements will help increase the mobility of European citizens within
Europe 1
 More and more European employees are internationally mobile in the labor market.
 A risk they run is that their pension accumulation is scattered over various countries and that—as a result—they lose information on their pension rights.
 In several European countries a tracking system for pension rights is present. However, a system on a pan-European scale is not yet in existence.
 Such a tracking system should give them an overview of their pension entitlements in the various European countries where they have accrued pensions and show them who to contact in case they have any questions.
 The pension tracking system can also provide a solution for Member States where no tracking system is available yet.
1. On basis of the EC White paper An agenda for adequate, safe and sustainable pensions (Feb. 2012)
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As a first step, the EC initiated a project in 2013 to support the development of a tracking service for private pension entitlements
 Call for proposal was in August 2012. Awarded to the consortium of PGGM,
MN Services, APG, Syntrus Achmea, ETK, PKA in May 2013.
Netherlands Denmark
 The goal of the project is to:
– Make a high level design and give recommendations for the
Finland development of a pan European pension tracking service.
– Focus on feasible solutions.
 The project started June 1 st , 2013 and ends on March 1 st 2015.
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The project result will address several challenges for an European tracking service
The high level design will make recommendations on:
 Architecture and functionality of the solution;
 Security of the solution;
 Identification and authentication;
 Information value and standardization of information;
 Alignment with different levels of automation and digitization of pension administrations;
 Ambition levels of the tracking service;
 Aspects regarding legal enablers and disablers on both national and
European level for the European tracking service.
The project result will be delivered as report to the EC and presented to interested parties at several events.
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We expect the answer to be a multi-level European tracking service to support different levels of digital communication
As a result of the research we expect to find differences in e.g.:
 Internet usage and availability;
 The degree of automation of pension administrations;
 The extent to which there are enablers and disablers in pension and privacy legislation for the establishment of a tracing and tracking service;
 The organization of the national pension sectors and the ability to set up such a service.
So we expect that:
 We need to design a modular tracking service, which allows for different levels of automation;
 The establishment of a European tracing and tracking service will be a process rather than a (single) project.
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The project makes use of existing initiatives to define the contours of the tracking service
Aspects of the approach are:
 Global analysis of the existing pension communication methods and tracking services in Europe, and the experiences with these forms of communications;
 Making use of existing ideas and initiatives for tracking services through contacts from pension organizations like DG EMPL, EAPSPI,
AEIP, Pensions Europe etc.;
 Detailed research on a select number of existing tracking services to gather best practices and experiences;
 Involving external experts in discussing possible solutions and aspects of the European tracking service;
 Organizing events and exchange of ideas to discuss results.
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The projects will contact experts within the European countries to gather information and discuss subjects
Getting information:
 Through a EU wide survey;
 Through meetings with external experts where the project can discuss its findings;
 Through interviews with organizations and experts;
 By asking organizations that have expertise is specific domains to give their view on solutions.
Last but not least …
By being visible as a project and make sure that people and organizations that have expertise in this field and want to contribute, can find us.
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A step —for which we would like to ask your support and participation —is the content
 The goal is to gather information about the way different organization communicate pension rights. This is done to create a general view on how different organizations in Europe handle this within the survey.
 The survey is sent to major European Pension and
Social Security Organizations.
 The survey will provide information how pension information is provided towards members
 We like to ask you your opinion about providing information about pensions…
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The several pension communication aspects
Such as:
 Channels for (obligated) pension communications;
 Use of digital communication;
 Identification of participants and/or beneficiaries;
 The use of external tracking/communication services;
 Legal restrictions;
 Finding participants and/or beneficiaries;
 Initiatives for tracking services.
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Questions & Remarks
Join our workshop
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2nd regime initiative by EIOPA:
Possible EU-single market for PPPs
European Pension Debate
28 November 2013, Tilburg

Overview
Motivation and aim
Possible regulatory approach
Next steps
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European Commission
• 07/2010 – Green Paper - towards adequate, sustainable and safe European pension systems
• 02/2012 - White Paper: An
Agenda for Adequate, Safe and
Sustainable Pensions
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Pensions adequacy
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Replacement rates in EU (2011)
„Pension gap“
Source: Eurostat, http://epp.eurostat.ec.europa.eu/tgm/graph.do?pcode=tsdde310&language=en
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Shares of the different types of pension schemes in gross RR for average earners
2010
Source: Adequacy and sustainability of pensions. http://ec.europa.eu/europe2020/pdf/themes/04_pensions.pdf
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Shares of the different types of pension schemes in gross RR for average earners
2050
Private sector products (red+green) will play more important role in securing adequate retirement income in most EU MSs.
Source: Adequacy and sustainability of pensions. http://ec.europa.eu/europe2020/pdf/themes/04_pensions.pdf
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EIOPA Task Force on Personal
Pensions (TFPP)
• 07/2012 request from COM to EIOPA to launch work on personal pensions
• Provide technical advice on the o „ prudential regulation “ and o consumer protection measures required to develop an EU-wide framework for the activities and supervision of personal pension funds.
• Consider at least two approaches : o develop common rules to enable crossborder activity of personal pension schemes
(similar to the IORP Directive); and o develop a 2 nd regime, whereby EU rules do not replace national rules but are an optional alternative to them.
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TFPP workplan
• Aim: Help creating a single market for PPPs and thus contribute to closing the pensions gap.
• Workplan:
1. Discussion paper – May 2013
- Public consultation – May – August 2013
- Public Event – June 2013
2. Preliminary report - due December 2013, BoS approval end January
- Public event – Q1/Q2 2014
3. Final report – 18 moths after EIOPA receives detailed
CfA
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Overview
Motivation and aim
Possible regulatory approach
Next steps
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PPPs in EU
IORP
Insurance (ring fencing)
Insurance
UCITS
Bank
Unidentified
More providers
1st pillar bis
• Extremely diverse landscape.
• Common features: long term, DC, retirement purpose
Source: EIOPA Database, https://eiopa.europa.eu/publications/database-of-pension-plans-and-products-in-the-eea/index.html
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Most important obstacles to single market
• Taxation
• Social law o Competence of MSs:
• Contract law
• Work initiated by COM – 2nd regime (EICL)
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Two regulatory tools
• Harmonisation of existing PPPs o Directive to establish framework for protection of PPP holders
- Transparency and disclosures
- Selling practices similar to MiFID and IMD but adjusted for
PPP specificities
- Professional requirements – dtto
- Product regulation – dtto
• Creating highly standardised EU PPP – 2 nd regime
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What is 2 nd regime?
• Regulation – directly applicable instrument
• does not replace existing national level rules, but offers an alternative to them
• private parties (providers and PPP holders) can choose which of the two bodies of law will govern their legal relations
• Examples of existing 2nd regime regulations include: o European Company Regulation (EC) No 2157/2001 o European Patent - Regulation 1257/2012
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Content of the 2 nd regime regulation
• Definition of PPP
• Focus – accumulation phase, all types of products (DB,
DC, DC with guarantees)
• Elegibility/scope o EU regulated entities o EU non-regulated providers provided that they meet prudential rules set out in 2nd regime regulation
• Governance/Administration o individual accounts; sub-accounts to accommodate different tax, contract law, social and labour law and other obstacles
• Transferability
• Minimum content of contract
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Content of the 2 nd regime regulation
( con’d.)
• Protection of PPP holders o Transparency and disclosures o Default options o Life-cycling and enrolment of members into funds that best match their age as default option o Transfer from accumulation into pay-out phase
• Prior verification of compliance with 2 nd regime product requirements + continued oversight
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2 nd regime: challenges
• However o Tax law differences remain the hurdle
• TFPP conclusions: o further work at EU institutions level towards clearly identifying the costs and benefits of establishing a 2 nd
Regime for EU PPPs. o challenge: how to attract critical mass to make the product success o trade-off between product standardisation and product innovation.
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Overview
Motivation and aim
Possible regulatory approach
Next steps
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Next steps
• Public event – Q1/Q2 2014
• Detailed Call for Advice (CfA) from COM
• Final report – 18 moths after EIOPA receives detailed CfA
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Thank you
Peter Penzes
EIOPA TFPP chair
National Bank of Slovakia email: peter.penzes@nbs.sk phone: +421-2-5787 3374

Hans van Meerten
28 november 2013
8 th European Pension Debate
Tilburg University

1.
2.
3.
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 I) Multinationals setting up an IORP to consolidate retirement plans
 Improving governance of pension fund (“in control”)
 Reduction of financial vehicles per corporate entity
 Efficient Communication
 Economies of scale
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
II) Solution for internationally mobile employees
 Removes barriers to international mobility
 Transparency for participants (EU case law)
 Economies of scale
III) Cross-border solution for other institutions, as
EU bodies, governments, commercial parties
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Custodian
Employer
Particpants
IORP
Admin
Asset
Manager
Insurer
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





nd
th
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8 th Tilburg Pension Debate

Scheme A
IORP
Scheme B
Scheme C
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Scheme
A + B
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
I)
II)
III)
IV)
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Workshop 1: TTYPE: René Boekestijn / Eric van Elburg room DZ 3 (other building)
Workshop 2: TFPP: Peter Penzes room TZ 4 (this room)
Workshop 3: Pan EU solutions: Hans van Meerten room DZ 4 (other building)
Please note: tea break in this building from 16.00 to 16.30
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Report from the workshops, conclusions, suggestions and next steps
Pierre Akkermans
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Final remarks
Bastiaan Starink
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www.tilburguniversity.edu/ccp