Martin Delaney finds the Belgian pension fund industry waiting to find out if a new coalition government, when it is formed, will have the will to take bold decisions on retirement agePost-election calm has descended on the Belgian pension fund market. Following the emergence of the New Flemish Alliance as the largest party in the June elections, the pension fund industry is playing a wait-and-see game while a new coalition government is formed.
The country faces the usual issues of an ageing population and declining workforce, but has moved recently to establish a new law for the supervision of financial institutions – covering both banks and insurance companies. While the new law does not impact hugely on the pension fund sector, it has taken a twin-peak approach to supervision, moving the prudential oversight for banks and insurance companies under the authority of the national bank, while consumer protection issues remain within the remit of the main regulator, the CBFA – as do those concerning pension funds.
With regard to pension funds, the Belgian Association of Pension Funds (BVPI-ABIP) has been lobbying hard to ensure that the financial and social regulatory aspects remain under the auspices of one regulator – rather than being split between the national bank and the CBFA.
No decision has yet been made regarding splitting the prudential and social oversight over pension funds. Although the new law has been approved by both the chamber of representatives and the senate, it has yet to be published.
Any questions over funding issues have been almost wholly resolved. At a conference held in June, the regulator informed the audience that the funding level versus short-term pension liabilities (which is the minimum legal funding requirement), including any solvency margin, now stands at 136.22% (assets to liabilities); the funding level against long-term pension liabilities is at a sustainable level and the solvency margin stands at 115%.
According to Jos Verlinden a director of the BVPI-ABIP, more than two-thirds of funds that were underfunded at the end of 2008 have returned to a healthier footing, and the file has now been closed by the CBFA, which was monitoring the situation. The remaining third are on track to return to better funding levels – or are ahead of the CBFA’s recovery plan – with just a handful of cases requiring further investigation.
The average pension fund has returned 15.7% for 2009 – or 15.4% adjusted for inflation.
Further moves have also been made within the provision of second-pillar pensions following the introduction of the Vandenbrouke Law 2004, which saw supplementary pensions introduced on a sector-by-sector basis. Last year, coverage was forecast to rise to 80% within two years, and it has already reached 70%. Verlinden says the BVPI-ABIP investigated the state of affairs as part of a briefing note for the incoming government and was “surprised” that the percentage was so high.
The nursing and non-profits sectors have already concluded a quality of labour agreement that will be implemented in January 2011. This will nudge coverage close to 80% overall.
The state pension, which is earnings-related, remains under pressure. The ratio between active workers and retirees is declining – and is set to get worse. Dire predictions of one pensioner to every two working persons are not unusual, and questions are being asked – not whether the state can afford it (it can’t) but what the solution might be.
Will the retirement age increase? It stands at 65, but most people are retiring between 58 and 62. So far very few politicians – let alone those who might form part of the new coalition government – have been able to take the risk of calling for an increase, but there has been a groundswell of opinion behind preventing people from taking early retirement. At present, individuals can draw on their second-pillar pension after the age of 60 – and questions have been raised whether that barrier should be raised to 65.
But practical realities and political expediency are bad bedfellows, and it remains to be seen whether the new coalition government has the political will to act.
