“Mars Pension Fund is approaching an entirely new pension plan. We know the basic outlines of that new plan, but there is also much to be done.” Two years before the introduction of the new plan, where does the fund find itself? And what remains to be done?
Talking is Fred Nieuwland, chairman of the Mars Pension Fund board: “Currently, all parties are working on the transition plan, which should be completed by the end of the year.”
Making plans
The transition plan includes what the new pension plan will look like and how high the contributions will be. It also describes how survivor's pensions will be arranged. Fred: “The outcomes of both the current and the new pension plan will be fairly similar. In the future, you can also expect a retirement pension and we will arrange pensions for your surviving relatives. In terms of individual amounts, we won't be able to say anything until close to the transition, because the calculations are linked to the coverage ratio on December 31, 2026.”
Implementation not until 2027
When asked why the preparations are taking so long, Fred mentions three main reasons: “First of all, things are really going to change. Currently, there are two different pension plans. First of those two is the final pay plan – where pensions are calculated on the basis of the most recent salary – which provides certainty about the level of pension benefits. The pension to be achieved is set: if the returns are not sufficient, the contributions must go up, and vice versa. Secondly, there is de ARP/ASP plan, which is much more like the new pension plan.
In the new pension plan, pension contributions are set. The returns vary, and so does the pension to be achieved. This is a substantial difference between the old and new plan. It is important to reduce uncertainties in the new pension plan. We want to deploy several measures to this end, and their effect must be analyzed.”
Fred continues: “Secondly, this is a transition that has never occurred anywhere else, so we cannot use lessons learned. It is therefore important that this transition is flawless for all pension funds, which requires thorough and time-consuming preparation. Finally, many internal and external parties are involved, which requires a great deal of coordination. In short, it is a tough job that we really want and need to take our time for.”
Pension administrator is prepared
There are numerous rules that every pension fund must comply with before the regulators give the green light for the transition. Accordingly, the fund must submit an implementation plan and a transition communication plan to the regulators. Fred: “Therefore, a number of pension funds are postponing their transition. The preparation of the transition and the review process by the regulators are taking longer than estimated beforehand. The pension fund for maritime pilots, in Dutch Beroepspensioenfonds Loodsen, does already have that approval from regulators. They are with the same pension administrator as Mars. This means that our administrative organization is prepared, which is very positive. Also with a future perspective.”
Resilient and future-proof
Fred has some mixed feelings about the changes in the Dutch pension system: “Demographics made all the old pension plans increasingly expensive. After all, there will soon be far fewer workers than pensioners. The pension plans had to meet increasingly strict supervisory requirements and maintain hefty buffers. In those respects, we are better off with a new system that is sustainable for the distant future. On the other hand, the current final pay plan has advantages. For example, the employer guarantees to make additional contributions if necessary and the risk of reductions is very small. The ARP/ASP plan is actually closer to the new situation and ARP/ASP members may experience the transition to the new system as less impactful.
The new pension plan, where pensions can change from year to year, requires more and transparent communication with our members. Currently, we can work behind the scenes to ensure that the promised pension is paid out. Soon we will be in the spotlight as a pension fund, and we will have to provide adequate explanations for all results. In itself this is not a bad thing, but it demands a different perspective on communication than is currently the case, as our communication should not only be about an optimistic scenario. Now, we do use an optimistic central scenario in the future and we do not think anyone will lose out. On the other hand, should returns be disappointing, then pensions could go down.
Our goal is that as of January 1, 2027, every associate will be a member of the same plan: long-term associates and newcomers, young and old. That provides less complexity for both the pension fund and the administrator. Soon employers who have joined the Mars population will be able to join immediately. That allows employees to stay with the same pension fund when they switch within Mars Netherlands, which is very convenient.”
Great challenge
Fred continues: “I think this development in and of itself is a great challenge. If all of us – in other words, the entire sector – can make this a success, I think the countries around us will also be interested. It remains complex though: if you find one piece of the puzzle that fits, you will see another piece that you can't put anywhere. It does give me energy. It is part of the Mars culture to want to know the ins and outs: what is coming our way and what does it mean? For example, what do we do if inflation or geopolitical tensions rise? By answering questions like these, we want to ensure a new pension plan that can stand up to the test of time.”
New year's resolutions
The new year is approaching fast, and there is more to life than work. Fred: “A good new year's resolution for next year is to exercise enough. I'm going to start cross-country skiing! I also want to make sure I have a good work-life balance, which mainly means listening to my partner when she thinks I'm working too much.”