Pension solutions for multinational companies Robeco PPI Confident – Asinta Conference Amsterdam, 24 May 2012 Jacqueline Lommen / Xander Smelter For institutional investors
Pension solutions for multinational companies
Robeco PPI
Confident – Asinta Conference
Amsterdam, 24 May 2012
Jacqueline Lommen / Xander SmelterFor institutional investors
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1. International pension solutions via IORPs*
2. Dutch PPI pension institution
3. Robeco PPI
Pension solutions for multinational companies
IORP: Institution for Occupational Retirement Provisions
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DE NLUK
Company
Pension pooling (“IORPs”)
Local subsidiary
Local pension fund/ insurer
Pension assets
Pension asset classes
Asset pooling (“UCITS”)
Risk pooling
Risk pooling – asset pooling – pension pooling
Source: DNB
Various forms of cross-border pooling - suiting different pension needs and strategies
Cross-Border IORPs: Strategic drivers formultinationalsMore grip and control /Reduced operational risks(IFRS, compliance, IORP2)
• More flexible and predictable funding• Improved operational oversight (compliance)• Integral risk management• Less management time
Cost savings(single European entity)
• Lower regulatory burden (single supervisor)• Biometric risk pooling• Tax advantages
Internal branding (common look/feel, equality)
Pension provisions for mobile employees and senior executives
Framework for implementing change (DB ->DC, gradual convergence)
Efficiency gains /Quality enhancement(economies of scale)
• Investment performance enhancement• Consistent administration hub(s)• Better access to top quality resources• Fewer providers and interfaces
Flexibility:maintainthe local schemespecifics e.g.format (DC/DB,indexation),financing(contributions),solidarity(ring-fencing), etc.
Own identity:Maintain(part of)local governance,Information to members,language, etc.
Anticipating and digesting M&A transactions; divestitures
HRM / IEB manager
CFO / CRO Local Trustees /Members
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Source: AonHewitt / Netspar
5
IORPPensioninstitution
(financing vehicle,Legal entity)
PensionschemeA Pensionscheme
B
Regulated by financial/prudentiallegislation of country of domicile pension
institution(“Home country”)
Regulated by social- & labour lawof country of origin pension scheme
(“Host countries”)
PensionschemeC
Robeco PPI: international pension solutions
Source: EIOPA / Netspar
IORP: Institution for Occupational Retirement Provisions
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Two IORP models to choose from: “Closed-end” vs “Open-end”IORP
• IORP is created and owned by employer
• IORP capital is owned / paid up byemployer
• IORP manages schemes solely fromgroup/sector
• IORP is created and owned by financialprovider
• IORP capital is owned / paid up by provider
• IORP manages schemes from variouscompanies
Closed-end IORP Open-end IORP
IORP is a “pension trust”
Common business model in UK, Ireland,Benelux
IORP is a “financial institution”
Common business model in Germany,Switzerland, South-Europe, East-Europe
Both models can exist next to each other
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Cross-border IORPs - Some market insights and lessonslearned1. Local Social- and labour law and tax no longer major obstacles for international pension solutions
2. European pension funds is about creating a single pension institution, not a single pensionscheme
3. Twothird is stakeholder management; onethird is technical issues
4. Stepwise approach; local triggers create momentum (eg: deficits, trustees, M&A, localrestrictions)
5. As well DB (first movers!) as DC schemes
6. Pilot cases to create cross-border pension platform – testing the waters
7. EU memberstates positioning themselves for the cross-border market and accommodatingprivate sector
8. …
Practical experience and momentum being gained
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1. International pension solutions via IORPs*
2. Dutch PPI pension institution
3. Robeco PPI
Pension solutions for multinational companies
IORP: Institution for Occupational Retirement Provisions
Employer– Occupational pensions (2nd pillar)
Pension funds InsurerClosed-end PPI (employer owned)
Open-end PPI (financial institutionowned)
Foreign IORP (OFP, ASSEP,SEPCAV, trust, Kasse, Fonds,Gestora, etc.)
New!
Direct insured
“Buy-outs”
IORP / PPI
Company (opf)
Industry (bpf)
Profession (bpr)
Multi-opf (mofp)
PPI: a new Dutch pension vehicle to run Dutch (and non-Dutch)pension scheme
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PremiePensioenInstelling (“PPI”) is a full-fledge pension institution, comparable to GermanPensionKasse/PensionFonds
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PPI – brief description
PPI:
1. “Premium Pension Institution” (“PremiePensioenInstelling”)
2. full-fledge pension institution equipped to run occupational pension schemes (“pensionplans”) on behalf of employers and employees
3. specially designed to act as a European-wide pension fund i.e. to run pension schemesfor employers and employees in various countries out of a single entity
4. has been introduced by law on 1/1/11
PPI introduction triggered by:
1. Positioning The Netherlands as a leading pension country and international pension hub
2. Facilitating employers in offering pensions to their employees (in local markets andinternational)
3. Triggering change in “troubled” local Dutch pension market
Cross-border pension institutions (“IORPs”): Acomparison
IR/ UK LU LI BE DE NLTrust ASSEP SEPCAV CAA PFonds OFP PFonds PKasse Pfonds PPI
Governance
Scope
Finance
“Nature” pensioninstitute
Pens inst invest fund insurer pensioninstitute
pensioninstitute
pensioninstitute
insurer pensioninstitute
investfund
Support
11
Source: Aon Hewitt
Fundamental differences between IORPs require a careful selection byemployers/employees see next slides
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Comparison PPI and other IORP vehicles (1)
Ownership : Open-end and Closed-end PPILegal form : Free to choose (NV, BV, mutual)Governance : Flexible. Governance structure depends on legal form ánd on own preferenceBoard composition : No mandatory trustees or employee representatives in overall PPI Board
PPI Governance structure is very flexible
PPI is a non-risk bearing entity
The PPI itself is NOT allowed to absorb financial (minimum return) guarantees nor biometric risk (longevity,death, disability) on its own balance sheet.
Note: PPI is fully allowed to run/offer pension schemes which include these risk covers, but risks have tobe outsourced to a 3rd party e.g. insurance company, captive
PPI has a broad scope
Pension schemes : All kind of pension schemes (“premieregelingen”)Geographical focus : Pension schemes for employees and employees from various countries i.e. >EU30Companies : No restrictions regarding origin of employer i.e. part of a specific group, industry, region
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Funding requirements: PPI is a non-risk bearing entity. As such, funding rules are relaxed:Technical provisions are not applicable i.e. discount rate, mortality tablesSolvency buffers are not required (for biometric risks and financial guarantees)
Operational risk: PPI has to maintain strict solvency buffers to cover operational risk (in % of AuM)
PPI funding rules are flexible and limited in size
Ring-fencing : Optional ring-fencing i.e. not mandatory nor forbidden.Member protection : Well-developed Dutch bankruptcy laws i.e. members’ pension assets strictlyseparated from other PPI
creditors
Optional Ring-fencing
Comparison PPI versus other IORP vehicles (2)
The Netherlands international pension hub
Government support : PPI introduced to position the Netherlands in European XB pension market.Pension experience : broad, longstanding and proven Dutch pension expertise and (service-)providersInternational mindset : multiple language capabilities and culture.Supervision/Regulation : strict supervisory reporting, qualifications of Board members, market conductrules, etc.
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1. International pension solutions via IORPs*
2. Dutch PPI pension institution
3. Robeco PPI
Pension solutions for multinational companies
IORP: Institution for Occupational Retirement Provisions
In summary: Robeco pension solutions
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Small CorporatesPension Marketsegments Large Corporates MNCs
Client pension needsTailored solutions, unbundled- Pension advisors involved -
Standardised, bundled offering- via Intermediary -
‘Deal structuring’, international,partners
- In close cooperation withConsultants -
Robeco pension propositions
1) Robeco PPI + “Smart Pension” (local and cross-border)
2) IORP tailor- made pension solutions:– outsourcing services for IORPs owned by employer– co-provider in international pension solutions for MNCs– white labeling for 3rd party pension providers
Bundled or tailored pension solutions for various market segments
3) Pension asset management services– Investment mandates, funds, fiduciairy, ALM, engagement,etc.
SME
Insurance
Robeco PPI: Three-fold innovation in the international pensionmarkets
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RobecoPPI
(IORP)“Smart
Pension”
Life-Cycleinvesting
Pensioninstitution
Pension scheme
Cross-borderAdministratio
n
Execution
See next slides for more details
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Robeco PPI: an international pension provider
Robeco PPI launched in 2011Fully licensed pension institution (open-end IORP), well-funded and backed up by Robeco
Operating out of new Dutch PPI vehicle
Leveraging on Robeco’s >25years DC pension experience
>50,000 scheme members, Aum circa 1bn
International focus
Partnering model; best-in-class providers
Insurance cover for biometric risksPreferred partnerTailor-made pension solutions(international)
Administration and membercommunicationInternational capabilities and mindset
Investing via innovative LifecyclingInternational pension assetmanager
Insu-rance
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-stration
Insu-rance
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Pension scheme “Smart Pension” (1)
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-stration
Black versus White ??!! DBDC
Employers:“IFRS proof” & predictable impact on P&L
Low and transparant operational costs (advantages ofscale)
Integer pension promise
Employees:Controlled life-cycling investing (default option)
Transparency re. premium contribution, accrued valueand expected pension benefit
Collective biometric risk coverage (solidarity)Simplicity
Smart DC
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St PPIRobeco
SmartPensionScheme
Easy
Advanced1.Life Cycling
3.Opting Out
2.Minimumreturn /Guarantee
Pension scheme “Smart Pension” (2) Insu-rance
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-stration
Examples of Robeco PPI clientcases:1. Supplementary DC schemes2. Transition from (closed) DB to
DC schemes3. Liquidations of pension funds4. International solutions
Insu-rance
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Investments: DC Life cycling – Advanced (1)
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-stration
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63
Risicovol Risico-arm
• Allocation between matching (green colour) and return fund (red colour)
• Allocation path is client-specific (”risk tolerance”) Per company, group of employees or evenindividual member
• Based on latest “Human capital Theory”
% ofAssets
Age of schememember
Smart pension Advanced offers a tailored solution taking into account different risk tolerance ofscheme members
Several criteria taken intoaccount in setting tailored
allocation path:DC scheme purpose, Age,
Salary level, Human capital,Premium contributions
Return
Risk
Insu-rance
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-strationInvestments: DC Life cycling - Advanced (2)
• Two-components model: Robeco Pension matching & Robeco Pension return fund
• Robeco pension asset management skills reflected in composition of both funds; active management
• Open-architecture
RobecoPensionReturnFund
RobecoPensionMatching
Fund Mitigation of as wellmarket, inflation ánd
interest rate conversionrisk
Smart pension Advanced offers a “low hassle” and integer DC pension with optimal risk/return atreasonable costs
Optimal return / riskportfolio
Insu-rance
Pension administration: web-enabled membercommunication
electronic binder
Insight and switches
Pension planner
Employer dashboard
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Multi-country and multi-lingual
Up-to date information
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-stration
Employer Look&Feel
24/7 access
Call center
Interface with salary system
Insu-rance
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Insurance: biometric risks & life-long annuities
RobecoPPI
(IORP)
SmartPensio
n
Life-Cycle
investing
XBAdmini-stration
Insurance coverAccrual phase: Survivors benefits and Disability benefits covered
Payout phase: life-long annuities
Insurance carrierGenerali is preferred insurance partner
Other insurers optional, depending on client’s preference
* As of end Q1 2012: AuM euro 177bn
Retail 54.1%Institutional 45.9%
Client type breakdown Institutional business by client type
Netherlands 46.4%Rest of the world 53.6%
Clients by location
Pension funds 55.3%Insurance 19.4%Public/government 5.9%Corporate 5.1%Bank 4.5%Other 9.8%
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Robeco: a longstanding international pension assetmanagement company
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Robeco – international network
ChicagoHarbor Capital AdvisorsAsset management, sales
BostonRobeco Investment Management
Asset management, salesHarbor Capital Advisors
Sales
New YorkRobeco Investment ManagementAsset management, salesSAMAsset management, sales
ParisRobeco France
Asset management, sales
MadridRobeco Spain
Sales
Zurich; ZugRobeco Switzerland
SalesSAM
Asset management, salesCorestone
Asset management
RotterdamIntl. HQ; Alt & Sust. Inv.; Inv. Mgmt; Retail; TranstrendAsset management, sales, research
LuxembourgRobeco LuxembourgSales
FrankfurtRobeco GermanySales
BahrainRobeco Middle EastSales
MumbaiCanara RobecoAsset management, sales
Hong KongRobeco Greater Chinaand South East AsiaAsset management, sales
TokyoRobeco JapanSales
= investment management and sales= sales only= representative office
SydneySAMSales
ShanghaiRobeco Mainland ChinaRepresentative office
Greenbrae; Los AngelesRobeco Investment ManagementAsset management, sales
SeoulRobeco KoreaRepresentative office
TaiwanRobeco Greater Chinaand South East AsiaSales
Institutional Sales / Client Relationship Management
Bert EijkelenboomSalesmanager
Oskar PoieszManager Robeco Pension Providers
Frits BruiningsSenior Accountmanager
Ed VermeulenAccountmanager
Wendy WiglevenClient Service Officer
Client Services / Operational Support
Andrea van HaaftenSenior Client Service Officer
Selma TasgilClient Service Officer
Arjan van DongenAccountmanager /Proces Specialist
Premie PensioenInstelling
Jacqueline LommenBoard member Robeco PPIEuropean Pensions
Tel: +31.10.224.1283Mob: +31.6.1131.7279Email: [email protected]
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Robeco PPI – Client contact persons
Maureen SchlejenDirector Pension Sales
Xander SmelterInstitutional Sales Benelux
Tel: +31.10.224.7230Mob: +31.6.1278.64.97Email: X.Smelter @robeco.nl
Important Information
• This document has been carefully prepared by ‘Stichting Robeco PremiePensioenInstelling’ (Robeco PPI). It isintended to provide the reader with information on Robeco PPIs specific capabilities, but does not constitute arecommendation to buy or sell certain securities or investment products.
• The information contained in this document is solely intended for professional parties under the Dutch Act on theFinancial Supervision (Wet financieel toezicht) or persons who are authorized to receive such information under anyother applicable laws.
• The content of this document is based upon sources of information believed to be reliable, but no warranty ordeclaration, either explicit or implicit, is given as to their accuracy or completeness. This document is not intended fordistribution to or use by any person or entity in any jurisdiction or country where such distribution or use would becontrary to local law or regulation.
• Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco PPIs expectations forthe future. Past performances may not be representative for future results and actual returns may differ significantlyfrom expectations expressed in this document. The value of your investments may fluctuate. Results obtained in thepast are no guarantee for the future.
• All copyrights, patents and other property in the information contained in this document are held by Robeco PPI. Norights whatsoever are licensed or assigned or shall otherwise pass to persons accessing this information.
• The information contained in this publication is not intended for users from other countries, such as US citizens andresidents, where the offering of foreign financial services is not permitted, or where Robeco's services are not available.
• Stichting Robeco PremiePensioenInstelling’ in Rotterdam (Trade Register no. 51867680) is licensed by the Dutchregulator ‘De Nederlandsche Bank’.
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Disclaimer