To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Hewitt Associates LLC. Cross-border European pension funds (IORPs) The positioning of The Netherlands in the emerging European pension market Jacqueline Lommen European Pension Summit – Amsterdam – 11 November 2009

2 Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussion IORPs*: Institutions for Occupational Retirement Provision 2

3 Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussion IORPs*: Institutions for Occupational Retirement Provision

4  IORP Directive (2003/41/EC) has been issued in 2003  Implemented in 2005 – 2007  All EEA30 member states have IORPs in place  30+ different IORP vehicles  Circa 10,000 IORPs  Circa 100 cross-border IORPs European Pensions Directive – state of affairs

5 IORPs: Pension institution vs. schemes IORP* Pensioninstitution (financing vehicle, Legal entity) Pensionscheme A Pensionscheme B Pensionscheme C Regulated by the social & labour law of the country of origin of the pension scheme(s) (“Host countries”) Regulated by the (financial) regulation of the country of domicile of the pension institution (“Home country”) IORP Directive “Single lead supervisor” IORP*: Institution for Occupational Retirement Provision

6 UK BENL Company A Pension pooling (IORP) Local company / local subsidiary Pension institution Pension assets Investment portfolio IORPs: Pension vs. Asset vs. Risk pooling Asset pooling (UCITS) Risk pooling

7 Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussions IORPs*: Institutions for Occupational Retirement Provision

8 Reduced operational risks More grip and control (IFRS, compliance, IORP2) Simplified governance Reduced internal management time Improved operational oversight Integral risk management Cost savings (single European entity) Lower regulatory burden Single reporting Lower / more flexible financing Tax advantages Internal branding (common look/feel, equality) Pension provisions for mobile employees and sr executives Framework for implementing change (across Europe) Efficiency gains (economies of scale) Investment performance enhancement Consistent administration hub(s) Better access to top quality resources Fewer providers and interfaces Flexibility: maintain the local scheme specifics e.g. format (DC/DB, indexation), financing (funding level, contributions), solidarity (ring-fencing), etc. Own identity: maintain governance (social committee), Information (language), etc. IORPs meeting market needs Anticipating and digesting M&A transactions; divestitures HRM / IEB manager CFO / CRO Members

9 IORPs: a step-by-step approach Corporate HQ EB manager / global pensions department IEB Database Risk pooling Asset pooling Expats / Sr executives (IORP) Pension pooling (IORP) Accounting consolidation Pan-euro IORP Benefit audit / pension benchmarking

10 Real life examples IORPs Early movers (CEIOPS overview): Existing cross-border cases Internationally mobile employees and senior executives Multinational companies: Combining 2 or more existing local pension schemes or IORPs, stepwise Creating new single pan-European or regional (DC) pension platform M&A: consolidation into group / anticipating and digesting divestitures Financial Service Providers: IORP subsidiaries of financial services providers New markets, product development

11 IORP Location - Regional clusters Ireland: Anglo-Saxon region (UK, US) contract law / trustees DC focus asset pooling focus Belgium Continental European region DB / DC integral pension offering checks & balances governance Luxembourg: Broad regional base DB / DC asset pooling focus corporate control financial service providers ????: East-European region DC focus admin hubs uniform DC schemes Liechtenstein ??: German-speaking (DE, CH, AT, IT, SCAN) DB focus integral pension offering “rules-based” “insurance”culture

12 Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussions IORPs*: Institutions for Occupational Retirement Provision

Algemene PensioenInstelling (API): 3 phases Multi-OPF multi Ondernemings- PensioenFonds PPI Premie Pensioen- Instelling API Algemene PensioenInstelling  new Dutch IORP vehicle  Financial Law (“Wft”)  Ministery of Finance  strict and limited scope  target group: foreign multinationals  change existing IORP vehicle (“pensioenfonds”)  Pension Law (“Pw”)  Ministry of Social Affairs  strict and limited scope  target group: Dutch multinationals  change existing IORP vehicle (?)  Pension Law (“Pw”) (?)  Ministry of Social Affairs (?)  broad scope  target group: local and foreign mutinationals Phase I Phase III Phase II

14 Different IORP vehicles – selection criteria Funding requirements: Size of technical provisions ánd security mechanisms Flexibility of funding Governance: Founders, legal form, board composition, social committees Compliance regulation Scope: Kind of schemes, risk-bearing, outsourcing, clients, etc. Ring-fencing Investment restrictions Other: Support authorities Discretionary powers supervisor

15 IORPs - technical provisions differ considerably Source: CEIOPS: “Survey on fully funded, technical provisions and security mechanisms in the European occupational pension sector”, 4/2008

16 Technical provisions Assets Regulatory own funds Solvency buffers / subordinated loans Additional assets Protection institutionSponsor covenant Security mechanisms Fully funded Balance sheet IORP 100% 105% IORPs financial requirements

17 Positioning Dutch IORP vehicles PensioenfondsPPI (API Phase I) MOPF (API Phase II) OFP / ASSEP (API Phase III) Management composition Ownership / founders Legal form

18 Positioning Dutch IORP vehicles PensioenfondsPPI (API Phase I) MOPF (API Phase II) OFP / ASSEP (API Phase III) Management composition Ownership / founders Legal form Schemes Activities Risks Ring-fencing

19 Positioning Dutch IORP vehicles PensioenfondsPPI (API Phase I) MOPF (API Phase II) OFP / ASSEP (API Phase III) Management composition Ownership / founders Legal form Schemes Activities Risks Ring-fencing Financing requirements Regulatory framework

20 Positioning Dutch IORP vehicles * PensioenfondsPPI (API Fase I) MOPF (API Fase II) OFP / ASSEP (België/Lux) Management composition employers / employees flexibleemployers / employees Ownership / founders employers / employees flexibleEmployers / employees Legal form“flexible” (Stichting) flexible“flexible” (Stichting) Schemesall“all” (NL: no DB) all Activitieslimited (domein) flexiblelimited (only NL) Risksflexibleforbiddenflexible Ring-fencingforbiddenoptionalmandatory Financing requirements FTKnot applicableFTK Regulatory framework ex-ante by law not applicableex-ante by law * Orange colour: additional requirements on top of IORP Directive

21 Positioning Dutch IORP vehicles * PensioenfondsPPI (API Fase I) MOPF (API Fase II) OFP / ASSEP (België/Lux) Management composition employers / employees flexibleemployers / employees flexible + social comite Ownership / founders employers / employees flexibleEmployers / employees flexible Legal form“flexible” (Stichting) flexible“flexible” (Stichting) flexible Schemesall“all” (NL: no DB) all Activitieslimited (domein) flexiblelimited (only NL) flexible Risksflexibleforbiddenflexible Ring-fencingforbiddenoptionalmandatoryoptional Financing requirements FTKnot applicableFTKIORP Dir Regulatory framework ex-ante by law not applicableex-ante by law ex-post/ante discretionary * Orange colour: additional requirements on top of IORP Directive

22  Traditionally very well-positioned (broad knowledge, long tradition, size and depth of the market, experienced providers)  Lack of efficient cross-border IORP vehicle  PPI and MOPF vehicle in Parliament; hopefully to become available in Q2/2010  Phase III API of key importance for “Nederland Pensioenland” Positioning The Netherlands in the European 2 nd pillar oocupational pension market

23 Agenda The IORP* Directive - some basics IORP Market developments The Netherlands – PPI, MOPF & API Questions & Discussions IORPs*: Institutions for Occupational Retirement Provision

24 Hewitt Associates Pan-European Pensions Team Tel Mobile

To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Hewitt Associates LLC. Cross-border European pension funds (IORPs) The positioning of The Netherlands in the emerging European pension market Jacqueline Lommen European Pension Summit – Amsterdam – 11 November 2009