- Stage 1: The introduction of the premium pension institution. Premium pension institutions must contribute to the attractiveness of the Netherlands as a country of establishment for pension institutions. A premium pension institution is not allowed to incur insurance technical risks and is explicitly not allowed to administer defined benefit agreements.
- Stage 2: The introduction of multi-company pension funds. Multi-company pension funds must better enable small pension funds to attain economies of scale.
- Stage 3: During the last stage of the introduction, the 'real' general pension institution is aimed at, able to administer defined benefit agreements as well.
Stages 1 and 2 have meanwhile been completed. Stage 3 must still be elaborated in more detail. The paragraphs below only discuss stage 1, the introduction of is the premium pension institution.
The IORP Directive constitutes the first step towards a European internal market for pension schemes by allowing pension institutions to engage in cross-border operations. It also seeks to encourage saving for pensions, especially in countries where this is still at a low level. Where investment policies are concerned, the Directive invokes the ‘prudent person’ principle.
For the Netherlands, the Directive represents an opportunity to position itself as a country of establishment for pension funds and service providers. The introduction of the premium pension institution constitutes the response to this opportunity.
Introduction of the premium pension institution into Dutch legislation
Since 1 January 2011, the premium pension institution has been included in the Financial Supervision Act (Wet op het financieel toezicht) and the Pension Act (Pensioenwet). A premium pension institution may only act as provider for defined contribution agreements and only during the accrual stage.
Nature of pension schemes administered by premium pension institutions
A premium pension institution focuses on administering defined contribution schemes, in which the contribution is fixed but the amount of the final pension is not.
A premium pension institution specifically focuses on the administration of pension schemes which do not involve any risk insurance. Hence, the premium pension institution is not allowed to pay annuities to pensioners or offer guarantees in respect of returns or otherwise.
If a pension scheme member wishes to receive periodic payments for the rest of his/her life on the basis of the capital accrued at a premium pension institution, he/she will have to turn to an insurer.
A premium pension institution does not qualify as an insurer and does not have to meet the
associated solvency requirements.
Thus, a premium pension institution is a new kind of pension administrator (alongside pension funds and pension insurers) faced with limited costs and having the potential to undertake cross-border operations.
Pension scheme members’ pension claims on premium pension institutions constitute a financial product as defined in the Financial Supervision Act.
European passport
Pursuant to the IORP Directive, the Financial Supervision Act and the Pension Act, a premium pension institution is permitted, relying on its licence obtained in the Netherlands, to undertake operations in the other countries of the European Economic Area (EEA). This is also known as the ‘European passport’.
Licensing by DNB
Pursuant to the Financial Supervision Act, a premium pension institution must have obtained a licence from DNB before engaging in its operations. Click here for further information on licensing requirements and applications for a licence.