Report of the Board of Governors
Core business 10
Reflections on the year 15
Pension fund governance 21
Reports of the Participants’ Council, Employers’ Council and accountability body 28
Financial policy 35
Recovery plan 44
Risk management 49
Pension fund management 59
Investment management 67
Consolidated financial statements 84
Notes – general 87
Accounting policies 91
Notes to the consolidated financial statements 99
Other notes 124
Company financial statements 129
Provisions of the Articles concerning profit appropriation 132
Actuarial statement 133
Auditors’ report 135
Management and key representatives 137
Abbreviations and definitions 141
Statistical information on participants 143
One hundred kilometres in under ten hours 17
Ten weeks to reach the summit 27
Nine months on a single painting 43
Six years to get a bonsai ready for sale 57
Forty years to generate clean, sustainable energy 65
One hundred years to create a safe, clean delta 81
4 Annual Report 2008 ABP
Participants and pensioners have the right to a sustainable and dependable pension fund
that is able to discharge its financial liabilities now and in the future.
To maintain a sustainable pension system
We aim to provide an affordable pension that is attractive to young and old and to
participants, pensioners and employers.
To spread risk widely
We operate pension schemes for all sectors and participants so that they feel comfortable
with the fund. We provide flexibility and individual choice within the collective framework.
To become a more participant-oriented fund
We provide relevant information that really helps our participants make the right pension
We focus less on older people in our communications and seek to impress upon younger
people the importance of a good pension.
We really involve our participants in the ongoing development of the fund.
We support employers in discharging their duty of care to their employees by relieving
them of or assisting them with certain tasks.
To provide more than pensions alone
We offer products and services that support active aging, thus promoting continued
participation in the labour market.
To be a professional organisation
We offer consistency of policy, focus on specific target groups (public and education
sectors) and good pension fund governance.
Stichting Pensioenfonds ABP was separated from the administrative organisation in 2008.
The new ABP organisation is shown schematically below.
Committees formed by the Board of Governors Independent bodies
Audit Committee (AC) Board of Governors Participants’ Council
Fund Policy Committee Employers’ Council
Investment Policy Committee Accountability body
Appeals Committee Investment Committee
Service (external AC members)
Pensioen Groep N.V.
5 Annual Report 2008 ABP
The names of the members of the Board of Governors, the committees formed by the
Board of Governors, the Participants’ Council and the Employers’ Council are given in the
chapter entitled ‘Other information’. The constituent bodies of the Board of Governors are
described in the chapter entitled ‘Pension fund governance’.
Role of Pension Chamber
The content of the pension regulations is determined by the Pension Chamber
(Pensioenkamer), in which the employers’ and employees’ organisations are represented
by their umbrella organisations.
The Board of Governors is responsible for:
– determining fundability;
– translating it into the pension regulations;
– determining the fund’s strategic choices;
– managing risk, including internal supervision.
The strategic choices encompass inter alia pension policy (pension rights and funding),
matching assets and liabilities, investment policy, communication policy and administration
Participation in the pension scheme is mandatory for public-sector employees under the
Public Servants Superannuation Act (WPA), which affects the relationship between the
affiliated employers and ABP. The Act also requires public-sector employers and employ-
ees to comply with ABP’s Articles and regulations. It is ABP’s object under its Articles to
operate as a sectoral pension fund for the public and education sectors. The Board of
Governors oversees the performance of that task, which has largely been outsourced to
the administrative organisation.
Military personnel participate in the ABP pension scheme pursuant to the Act amending
the Military Pensions Framework Act (Kaderwet militaire pensioenen). The reference in the
Act to the WPA imposes the above obligation to comply with the Articles and regulations
on the Minister of Defence and military personnel.
Chapter 4 and chapter 17, paragraph 4, of the ABP pension regulations state explicitly the
contributions for which the affiliated employers are liable to ABP and the pensions to which
they relate. These chapters also cover the periodicity of contribution payments and the
sanctions applied in case of late payment. ABP’s Articles require the fund to operate in
accordance with the Actuarial and Business Memo. The Articles also state that the fund’s
assets may consist inter alia of those contributions, the available resources and income
from investment of the available resources.
As regards administration, ABP has entered into a long-term agreement with the admini-
strative organisation APG Algemene Pensioen Groep NV (APG). The main tasks performed
by the administrative organisation on behalf of the fund are pension fund management,
asset management, communication and support services for the Board of Governors.
8 Annual Report 2008 ABP
2008, an extraordinary year Stichting Pensioenfonds ABP started the year in a strong financial position. Full indexation
was applied to pensions in 2008 and there was scope to make up for indexation missed in
previous years. Taking this indexation into account, the funding ratio as at year-end 2007
was 140 per cent, so 2008 started well.
By the time of the presentation of ABP’s half-year figures in June, the outlook was less
promising. The impact on the financial position of the credit crisis that broke in the summer
of 2007 did not become fully apparent until the second half of the year. The entire financial
sector was suffering from falling share prices and interest rates and confidence among
financial institutions evaporated.
The Board of Governors and the administrative organisation constantly monitored and
evaluated developments in relation to the fund’s position and took corrective action where
necessary. Despite these efforts, ABP’s assets shrank and its liabilities grew – in common
with many other pension funds – and the funding ratio declined. ABP’s financial position
deteriorated to such an extent that, by the end of the year, the funding ratio had fallen to
90 per cent, below the required minimum of around 105 per cent. In the light of ABP’s
financial position and the situation at the end of 2008, the Board of Governors, while fully
appreciating the disappointment and concern it would cause to participants and pensio-
ners, took the painful decision not to apply indexation to the pensions this year. ABP has
now submitted a recovery plan to the regulator, showing how the fund proposes to restore
its financial position. The recovery plan also explains how ABP will monitor the recovery
process and manage scenarios both better and worse than expected.
2008 was also exceptional in another sense: it was the year in which the ABP pension
fund was separated from the administrative organisation. This enables the pension fund to
focus fully on its ambition and objectives, while performing its core function of providing a
sustainable pension scheme, based on the principles of collectivity and solidarity, which is
attractive to all participants and pensioners. The administrative organisation is responsible
for pension fund management, asset management, communication and other services,
operating under agreements that define the expenses charged and tasks performed. The
Board of Governors of the pension fund is, of course, still ultimately responsible.
Theme of this annual report: In the midst of the current unrest on the financial markets, driven by sentiment that changes
the long-term view from day to day, there is a risk of losing sight of the fact that pension funds take the long-
term view because they have long-term liabilities. Participants just entering the labour
market and starting to build pension rights will be entitled to a pension that pays out in forty
years or so. ABP has to look far ahead in its planning and calculations.
ABP takes the same long-term view of the credit crisis. It has to address the problems the
crisis is creating and their consequences, including a substantially lower funding ratio and
a diminished asset base. Financial markets have experienced crises and extreme volatility
in the past that also had an impact on ABP’s position, but the reserves were soon repleni-
shed in the years thereafter and under-indexation was made up. Whether that will be the
case this time is by no means certain. The familiar warning still applies: ‘Past results give
no guarantee of future performance’.
9 Annual Report 2008 ABP
The short-term outlook is extremely weak, but improvement in the fund’s financial position
depends primarily on the investment results and the interest rate trend in the long term.
The global economy is expected to recover eventually, but the pace of that recovery is an
unknown factor. The Board of Governors will continue critically to review the principles of
financial policy, taking into account the experiences of 2008.
The short-term measures have been defined in a recovery plan, but responsibility for the
long term goes far beyond that. ABP’s primary object is to provide a good and affordable
pension for the participants and maintain the pension system based on the principle of
collectivity, with all the benefits that brings.
HCJL Borghouts, Interim Chairman of the Board of Governors of ABP
10 Annual Report 2008 ABP
Funding ratio The credit crisis hit the fund hard. The funding ratio was severely affected by lower prices
sharply lower and significantly lower market interest rates, falling 50 percentage points in 2008 from 140
to 90 per cent. There was a reserves shortfall at the end of the third quarter and a funding
shortfall arose in the fourth quarter.
The Pensions Act requires the fund to submit a recovery plan showing how it expects to
eliminate the reserves shortfall and funding shortfall within the statutory periods. Given the
exceptional situation, the Minister of Social Affairs and Employment extended the period
allowed for rectification of the funding shortfall to five years. ABP has submitted a recovery
plan which meets these requirements to the regulator, the Nederlandsche Bank.
Table 1.1 analyses the funding ratio in terms of available resources and liabilities.
Table 1.1. ABP’s funding ratio in 2008 (at nominal market interest rate)
ABP’s financial position 2008 2007 change (%)
Fund capital (in € billion) 172.9 216.5 - 43.6
Pension liabilities (in € billion) 192.9 154.7 38.2
General reserve - 20.0 61.8 - 81.8
Funding ratio (in %) 89.6 140.0 - 50.4
The investment results were far lower than in previous years, with a return of 20 per cent
negative in 2008. The fund’s capital decreased to € 173 billion as at year-end 2008 (2007:
€ 217 billion) and liabilities increased from € 155 billion to € 193 billion, mainly due to the
capital market interest rate relevant to the valuation of the liabilities falling from 4.85 to 3.57
Negative effects The 50.4 percentage point decline in the funding ratio is analysed as follows:
- decrease in capital due to investment return: - 27.3
- increase in liabilities due to addition of interest: - 6.2
- increase in liabilities due to indexation: 0.0
- increase in liabilities due to lower capital market interest rate: - 24.8
- other effects: 7.9
- net effect on funding ratio: - 50.4
The other effects relate to contributions, benefits, value transfers and expenses.
With a funding ratio of over 100 per cent, capital growth of 1 per cent translates into an
increase in funding ratio of more than 1 per cent. Growth in the liabilities has the opposite
11 Annual Report 2008 ABP
Market interest rate The liabilities are valued separately from the investments. The valuation of the liabilities is
exceptionally low and not based on the expected but not yet realised investment returns, which depend largely
volatile on the investment mix. Instead, the valuation is calculated at a nominal market interest rate
that matches the maturity of the liabilities. This prudent approach gives more reliable
results in normal circumstances.
With confidence not yet restored to the market, despite the action by central governments
and central banks to limit the consequences of the credit crisis, the market interest rate is
low and extremely volatile. Fluctuations in the funding ratio of up to 10 percentage points
in one month were witnessed on more than one occasion in 2008. The arithmetic result of
the liabilities valuation process should therefore be viewed with some reservation, even
though the average interest rate has dropped significantly since October 2008.
The volatile course of the funding ratio and the underlying causes are illustrated in the
figure below. The black lines show the position at quarter-end. The coloured bars show the
factors causing the change in the funding ratio over the period, distinguishing between the
effect of interest rates on the liabilities, the effect of the return on the assets and other
Figure 1.1 Changes in funding ratio and underlying causes in 2008
Q1 Q2 Q3 Q4 Q1-Q4
12 Annual Report 2008 ABP
If we calculate the liabilities at a fixed interest rate of 4 per cent, as an example of a
prudent long-term interest rate consistent with the maturity of the liabilities, the funding
ratio as at year-end 2008 was about 95 per cent (2007: about 125 per cent). This also
reflects the effect of the credit crisis, albeit less prominently because, with a notional fixed
interest rate, only the falling prices are a factor.
No scope for indexation With effect from 1 January 2008, full indexation was applied and the indexation shortfall
accumulated in past years was made up. Since then, however, the fund’s financial position
has deteriorated to such an extent that the Board of Governors did not consider it appro-
priate to apply indexation to benefits and accrued pension rights with effect from 1 January
Current pension benefits The provision for pension liabilities relates to all accrued pension rights, not just those of
unchanged pensioners, but also those of active participants and former participants. Despite the low
funding ratio, the disbursement of pensions in payment will continue unchanged for the
time being and movements in prices and interest rates will have no effect. These factors
do, however, affect the funding ratio and hence our progress with the recovery plan. Future
indexation will depend on how the funding ratio improves during the recovery phase. If the
funding ratio does not improve fast enough and there is no other way for ABP to rectify the
funding shortfall within the set period of five years, it may not be possible to avoid
curtailment of pension rights in the future.
Investment policy The return for 2008 was 20 per cent negative, reducing the average nominal return for the
still focused on the period since 1993 to 5.9 per cent as at year-end 2008 (2007: 7.9 per cent). The average
long term return for the past ten years has been 2.9 per cent. Apart from necessary short-term
corrections, ABP remains firmly committed to the strategic objectives of its investment
policy in the long term.
The average real return, adjusted for wage inflation, for the period since 1993 declined to
3.7 per cent as at year-end 2008 (2007: 5.8 per cent). To put this in perspective, the
contribution rate is set on the basis of a prudent estimate of the long-term real return of
3.0 per cent.
2009 contribution rate In the first half of 2009, the contribution rate for retirement and surviving dependants’
pensions was 20.0 per cent, 0.4 percentage points higher than in 2008. In principle, ABP
sets cost-covering contribution rates, which are not raised by reference to an indexation
matrix. In other words, contribution rates do not depend on the financial position. The
contribution rates for 2009 have been set on the basis of the cost-covering contribution
rates at the end of 2008, without taking account of the recovery plan submitted in respect
of 2009. To increase ABP’s recovery capacity, the recovery plan provides for this con-
tribution rate to be increased during the funding shortfall period by the addition of a
recovery surcharge. This recovery surcharge will be 1.0 per cent1 for the second half of
The sector-specific contribution rates for disability pension (AOP) remain at the 2008 level
and the average AOP contribution rate stays at 0.5 per cent.
1 The recovery surcharge with effect from 1 July relates to the expected reduction in the early-
retirement/flexible pension contribution rate.
13 Annual Report 2008 ABP
High service score ABP also measures its performance by the quality of its internal operations. The objective
is a high level of service at competitive administration cost. With effect from 2008, the
entire administration has been outsourced. ABP measures its performance against those
of other leading pension funds, as monitored by the Cost Effectiveness Measurement
(CEM) Institute. This benchmark comprises 77 pension funds around the world.
Table 1.2 compares the service score obtained by ABP’s pension fund management with
the CEM world average. CEM improved the method of calculating the service score in
2008 by basing it on current performance in terms of pension fund management. The
service scores for previous years in the table have been restated to facilitate comparison.
Table 1.2. Service score compared with CEM world average (max = 100)
2008 2007 2006 2005 2004
ABP 89 88 84 80 77
CEM world average tba 68 70 69 68
The service improved by 1 point to 89 points (max = 100), placing ABP among the
highest-scoring pension funds worldwide. The CEM figures for 2008 will not be available
Competitive cost Table 1.3 shows the pension administration expenses per participant compared with the
per participant CEM world median (in €)
2008 2007 2006 2005 2004
ABP 90 74 65 63 62
CEM world median tba 79 77 78 85
The pension administration expenses (according to the CEM definition) rose in 2008 to € 90
per participant, due inter alia to higher compliance, communication and ICT expenses.
Expenses were also higher in 2008 because pricing under the service agreement with the
administrative organisation is at arm’s length. The object is still to keep costs low.
14 Annual Report 2008 ABP
2008 2007 2006 2005 2004
Financial data (€ million)
pension investments 197,408 223,236 208,905 190,215 164,867
insurance investments 2,259 2,228 2,048 - -
other assets and liabilities -24,044 -6,651 149 400 3,184
A. Total investments2 175,623 218,813 211,102 190,615 168,051
retirement and surviving dependants’ pensions 189,400 150,844 152,199 150,208 130,740
disability pensions 3
1,993 2,188 2,350 2,521 2,706
flexible pensions 1,402 1,512 1,761 6,434 5,132
ABP ExtraPensioen 133 131 104 78 50
B. Provision for pension liabilities 192,928 154,675 156,414 159,241 138,628
insurance liabilities for own account/risk 2,532 2,102 2,023 - -
insurance liabilities for policyholders’ account/risk 213 198 191 - -
C. Provision for insurance liabilities 2,745 2,300 2,214 - -
D. General reserve (A–B–C) -20,050 61,838 52,474 31,374 29,423
E. Funding ratio of pension fund (A–C)/B (%) 90 140 134 120 121
nominal market interest rate (in %) 3.57 4.85 4.25 3.70 4.20
F. Numbers (at year-end)
in active service 1,133,000 1,122,000 1,106,000 1,102,000 1,113,000
former participants 872,000 848,000 816,000 792,000 761,000
pensioners 750,000 742,000 735,000 727,000 697,000
total 2,755,000 2,712,000 2,657,000 2,621,000 2,571,000
affiliated employers/sub-employers 3,985 3,999 4,091 4,187 4,317
employed by ABP (in the Netherlands) 9 2,489 2,387 2,389 2,385
employed by consolidated entities 4,082 778 796 521 490
G. Other information (%)
contribution rate for retirement and surviving
dependants’ pension (non-military)4 20.0 19.6 19.8 21.4 19.0
disability pension contribution rate (average)5 0.5 0.8 1.2 1.6 1.8
contractual salary increases 4.73 2.05 3.66 0.38 0.15
indexation 0.00 4.056 2.82 0.17 0.12
pension administration expenses per participant
(CEM definitions7 in €) 90 74 65 63 62
service score (CEM definition 2008, max = 100) 89 88 84 80 77
Z score (norm: ≥ –1.28 over a 5-year period) -3.1 0.6 1.0 0.4 0.6
return total (= direct + indirect, in %) -20.2 3.8 9.5 12.8 11.5
total return 10-year average (in %) 2.9 6.5 7.3 7.5 7.9
H. Solvency margin for insurance activities8 (%) 242 245 228 - -
2 Presentation changed slightly compared with 2007 5 Until 2007: disability and redeployment benefits contribution rate (high)
3 Until 2007, disability and redeployment benefits only; 6 Including post-indexation
since 2007 including ABP disability benefit (AAOP) 7 Except in relation to spreading of project expenses over three years
4 Including general surviving dependants’ pension 8 As from 2008, including Cordares Verzekeringen
15 Annual Report 2008 ABP
Reflections on the year
Financial position Stichting Pensioenfonds ABP (ABP) aims to index the participants’ pensions fully and
has deteriorated sustainably at an affordable price. Unfortunately, ABP was unable to fulfil that ambition
in 2008. In the wake of the credit crisis that manifested itself strongly from September
onwards, ABP’s capital buffers were rapidly depleted and its financial position, which had
still been excellent in June, suffered the consequences of the turmoil on the financial
markets. Falling prices and interest rates eroded both the assets and the funding ratio.
By 31 December 2008, the funding ratio had dropped to 90 per cent, down 50 points on
In the light of ABP’s weakened financial position, the Board of Governors decided not to
apply indexation to pensions as from 1 January 2009.
ABP has since submitted a recovery plan to the regulator, which is discussed in greater
detail in Chapter 6. The recovery plan is expected to eliminate the reserves shortfall within
the period of fifteen years required by law.
The period allowed for recovery from the funding shortfall has been extended by the
Minister of Social Affairs and Employment to five years, which can be met by the recovery
plan without additional measures. To increase ABP’s recovery capacity, however, the Board
of Governors has decided to apply a recovery surcharge to the (cost-covering) contribution
rate during the period allowed for recovery from the funding shortfall.
Communication given high High priority was given in 2008 to ABP’s communication policy, which complies with the
priority requirements of the Pensions Act. The principal objectives of the communication policy are
to fulfil the expectations of ABP’s participants and report progress towards the achieve-
ment of the pension fund’s mission and objectives.
As well as its normal duties, ABP’s Board of Governors devoted considerable attention in
2008 to pension fund governance, the separation of the ABP pension fund from the
administrative organisation and, of course, the credit crisis and its consequences and the
pension fund’s (financial) risk management.
Pension fund governance
New structure for ABP Following separation from the administrative organisation, ABP configured and imple-
mented its new structure in 2008, in compliance with the Pensions Act and the principles
of good pension fund governance formulated by the Labour Foundation (STAR). The Board
of Governors endorses and will comply with the principles of good pension fund gover-
nance adopted by STAR in December 2005.
The issues relating to the governance of the pension fund which were still open as at year-
end 2007 have now been resolved.
Separation of pension fund from administrative organisation
Separation of pension fund The decision to undertake the restructuring was adopted by ABP’s Board of Governors at the
from administrative end of 2007 and the ABP pension fund and the administrative organisation became separate
organisation entities with effect from 1 March 2008. This enables ABP to concentrate on achieving its principal
ambition and objective: to provide a good, affordable and sustainable pension. With this
separation, the ABP pension fund relinquished its self-administered status.
A Greek runner, Spyridon Louis, won the first
modern Olympic marathon in Athens in 1896.
The Olympic marathon was inspired by the
legend of the messenger Phidippides, who ran
from the town of Marathon to Athens in 490 BC
to announce the Athenian victory in the Battle of
The day of the race in 1896 was very hot and
Louis stopped midway for a glass of wine. When
told how far the others were ahead, he said he
would still overtake them. At 32 kilometres, the
leader Lermusiaux (a 1500m runner) dropped
out. The lead was taken by the Australian Flack,
who had already been victorious in the Olympic
800m and 1500m events. A few kilometres fur-
ther, he also retired, giving Louis the lead. In the
Olympic stadium, the crowd waited anxiously for
news. Cycle messengers were dispatched to the
stadium to report the current positions and a
police messenger was sent as soon as Louis
moved into the lead. When he arrived at the
stadium, Louis was met by Crown Prince Con-
stantine and Prince George of Greece. Louis
finished in 2:58:50, fuelled along the way by
wine, milk, beer, Easter eggs and orange juice.
His victory was celebrated in an extravagant
fashion. After winning the marathon, Louis never
ran another race. As well as the Olympic Sta-
dium in Athens, many Greek sports clubs are
named after this national hero.
The marathon has become very popular. There
were only seventeen competitors in the first
Olympic marathon, but over 38,000 runners
took part in the 39th New York marathon in Spy r idon ( SpY roS) loui s
Winner of the first Olympic
marathon in 1896.
One hundred kilometres in under ten hours
Abdelkarim Machichy is a committed long-distance runner. He has already run dozens of marathons in almost every continent
of the world and is not scared to take on the challenge of ultra-marathons over distances of 100 kilometres. The last time he
did that he recorded a time of 9 hours and 50 minutes.
It was around twenty-five years ago that Abdelkarim ran his first marathon, having previously taken part in various eight or ten-
kilometre races and several half-marathons. He estimates that he has since completed around seventy marathons in cities
such as Beijing, New York, Rotterdam, Amsterdam and Dubai, as well as three in Marrakech in Morocco, his country of birth.
He has also run several ultra-marathons, including the Comrades Marathon in South Africa (one year running 89 kilometres
downhill and the next year 87 kilometres uphill) and the 100-kilometre Winschoten Run on two occasions, as well as the
Haarlemmermeer Run several times and the 70-kilometre run around the island of Texel on three occasions. “My personal best
for a marathon is 2 hours and 51 minutes,” as Abdelkarim explains. “I’m not getting any better now, though. That’s because
I do too many marathons each year, and also the longer distances, which mean I have to do lots of training. Before you start
doing 100-kilometre runs, you first have to spend a few months doing a 70-kilometre run at least once a week. That’s when
I go for early-morning runs from Katwijk to Noordwijk, Sassenheim, Hillegom, Heemstede and Haarlem and then back via the
boulevard in Zandvoort. That’s 72 kilometres, all on my own as no-one else is mad enough to run such long distances.”
Just keep on going
During a race, Abdelkarim is far more focused on his body and general condition than on the distance itself, his time or the
result. “You never know beforehand how the race is going to go,” he explains. “You train for it and you know you can do it, but
you still never know how it’s going to turn out. You always get a dip after 70 to 75 kilometres and then you really start seeing
what you’re made of, but you shouldn’t spend time thinking about it. Even the runners leading the race have problems.
You just have to keep on going. If you can get through your dip, it will be fine.”
18 Annual Report 2008 ABP
A structure was chosen in which ABP holds 100 per cent of the capital in the administra-
tive organisation. The pension fund has entered into a long-term contract with the admi-
nistrative organisation which safeguards the continuity of the pension fund and keeps
costs under control.
Their relationship is governed by a system comprising a master contract, subsidiary con-
tracts and a service level agreement (SLA) for the coming year. When negotiating this first
SLA, the Board of Governors was advised by external consultants on the selection of
effective key performance indicators (KPIs). It is the task of the Board of Governors to
verify the correct implementation of this contract, in accordance with the requirements of
the Pensions Act. The Board of Governors monitors the functioning of the contractual
arrangements on the basis of status reports and checks.
An Executive Office has been set up by the pension fund to ensure close monitoring of the
administration and risk management functions on a continuous basis. Effective cooperation
between the Executive Office and the administrative organisation is essential for the effi-
cient functioning of the pension fund. Where necessary, the Executive Office has recourse
to external assistance and advice. In the coming year, the Executive Office will focus inter
alia on placing the assessment of the fund’s risk management on a more independent
Merger with Cordares The merger between the administrative organisation and Cordares as announced in the
previous annual report was finalised in 2008.
The credit crisis occupied much of the Board of Governors’ attention in the second half of
2008, and particularly in the last four months. The financial position deteriorated very
rapidly and, while the long-term strategic aim of investment policy remains unchanged,
corrective action has been taken where necessary. For example, the Board of Governors
has made several tactical changes to lower the risk profile to some extent and extended
the duration of the portfolio of fixed-income investments to hedge against the effects of a
further fall in long-term interest rates.
The consequences of the credit crisis prompted the Board of Governors to consider the
possibility of adjusting the balance between pension affordability and ABP’s ambition to
apply full indexation on the one hand and the associated risks on the other.
Integrated risk framework Risk management is a priority issue for ABP, given its mission, the growing complexity of
the business processes, the increasingly discerning client base, the new legislation and
regulations and the higher risk management standards demanded by the regulators. The
multitude of internal and external developments make effective internal management more
important than ever.
Raising risk-awareness is high on the agenda. A strategic approach was taken to risk
assessments conducted in the context of risk workshops in 2008, not only dealing with
the statutory requirements but also identifying risks that are relevant to day-to-day
operations. Discussion and assessment of the strategic risks results in an integrated risk
framework that helps to determine how ABP runs the risk control and management
19 Annual Report 2008 ABP
Compliance with legislation Because ABP attaches great value to its integrity and reputation, compliance with internal
and regulations and external standards and values is closely monitored. As well as observance of legislation
and regulations, compliance also refers to the integrity of people and processes and how
that is embodied in the organisation.
ABP is subject to various forms of supervision, both prudential supervision (Nederlandsche
Bank or DNB) and business conduct supervision (Authority for the Financial Markets in the
Netherlands or AFM). In order to demonstrate to regulators that it complies with the legislation
and regulations, ABP in turn has to verify that the activities of the pension administrator also
comply and has to demonstrate compliance by its own Board of Governors and staff.
In discharging its responsibilities in this area, ABP has conducted an in-depth analysis of
its compliance tasks and responsibilities. The relevant legislation and regulations requires
ABP to distinguish between its own tasks and those that have been outsourced to the
compliance function of the administrative organisation. Its own tasks relate primarily to
business conduct supervision and the outsourced functions are mainly concerned with
prudential supervision, in which ABP’s Board of Governors performs a monitoring and
As well as the Pensions Act and the Financial Supervision Act (Wft), other legislation comes
within the scope of the compliance function, such as the Occupational Pensions Scheme
(Obligatory Participation) Act 2000 (WBPF) and the Personal Data Protection Act (WBP).
Internal control The Board of Governors of ABP is responsible for the fund’s financial position and, in that
context, for the existence, configuration and functioning of the internal risk management
and control systems. The purpose of these systems is to monitor progress towards the
pension fund’s strategic, operational and financial objectives and enable reliable financial
reporting. The administrative organisation is responsible for the management of the risks
associated with outsourced processes. The outsourcing risk incurred by ABP is controlled
inter alia via periodic reporting by and consultation with the administrative organisation.
In the in-control statement included in the chapter on risk management, ABP affirms
inter alia the quality of the internal risk management and control systems with respect to
financial reporting on the outsourced investment and pension fund management pro-
cesses. This statement is based in part on an in-control statement issued to ABP by the
administrative organisation in that regard.
Corporate social responsibility
Contributing to For over 85 years, ABP has been helping to build a secure future for its clients, now
a secure future numbering 2.8 million participants and 4,000 employers in the public and education
sectors. Dependability and a long-term view are central to ABP. The fund is an important
player in the community, both directly through its activities on behalf of employers and
employees in the public and education sectors and indirectly via its investments. That is
why ABP is focusing increasingly on the effect of its activities on people, both outside and
inside the organisation, and on the environment. Solidity, dependability, humanity and
transparency are its core values.
In a society and economy that are constantly changing, ABP has the strength, the duty
and the ambition to continue discharging its social and economic responsibilities.
Corporate social responsibility (CSR) is therefore a priority for ABP at all times. CSR is
about the balance between people, planet and profit – society, environment and economy.
20 Annual Report 2008 ABP
With capital comes influence, and with influence comes responsibility. As a major investor
occupying a prominent position in the capital market, ABP is well aware of that respon-
sibility. With some of its investments it exerts significant influence and with others come
social responsibility. ABP’s Board of Governors pursues its own policy on environmental,
social and corporate governance (ESG) aspects with regard to the asset management
National and international regulations
Growing influence of ABP stays abreast of new legislation and regulations, both national and international. ABP
regulations does not shrink from exercising influence where necessary in the interests of sustaining the
collective pension system. It was partly due to ABP’s efforts that the period allowed in the
Pensions Act for recovery from a funding shortfall was ultimately set at three years instead
of the original one year.
International regulations have also threatened to make an increasingly profound mark on
the Dutch pension system. International legislation is often tailored to individual pension
systems, which are far more common around the world than our collective system. Some
European politicians, for example, have argued in favour of extending Solvency II, the
regulatory framework for insurance companies, to pension funds. This would have set far
higher standards on pension fund capital, the minimum required funding ratios would have
been higher and the period allowed for recovery from a funding shortfall would have been
reduced to one year. This argument ignores the fact that collective pension funds have
more levers at their disposal than insurance companies to limit their risks, making it
unnecessary to apply Solvency II. One of the principal attributes of collective pension
funds is solidarity between generations. Fortunately, most European politicians are now
persuaded of these differences, but we must be on guard.
There was also some debate in 2008 on the international (IAS 19) and national (RJ 271)
accounting rules for pension funds. These accounting rules wrongly stated that employers
had to account for all pension risks if the collective was exposed to any risk. In the Dutch
system, pension risks are shared by the active participants, pensioners and employers.
The national accounting rules have now been amended and, in the new draft guideline (RJ
271), has moved from a risk approach to a liabilities approach. This means that a distinc-
tion is no longer made between defined-benefit and defined-contribution schemes and
they are covered by the general rules for the recognition of provisions. Employers are only
required to include a liability in the balance sheet if there is de facto or de jure a liability to
the pension administrator and/or employees on the balance sheet date. In view of the
administrative savings that can be made in many cases, the Council for Annual Reporting
has explicitly permitted the new draft guideline to be applied to the 2008 financial
21 Annual Report 2008 ABP
Pension fund governance
Objectives ABP aims to provide a sustainable pension fund, based on principles of collectivity and
solidarity, which is attractive to all participants. The Board of Governors of the pension
fund is ultimately responsible for ensuring optimum quality, accuracy and openness in
implementation of the pension scheme agreed by the employers’ and employees’
The Board of Governors considers that pension fund governance must not only comply
with the relevant rules and standards, but must also contribute to the achievement of the
fund’s objectives. The Board of Governors endorses and will comply with the principles of
good pension fund governance formulated by the Labour Foundation (STAR) in December
2005. The governance structure was reconfigured and implemented in accordance with
those principles in 2008.
Pension fund governance structure
Configuration ABP’s governance structure consists of four elements: pension fund governance, internal
supervision, codetermination and accountability.
The Board of Governors has thirteen members: six members appointed by employees’
organisations, six members appointed by employers’ organisations and an independent
chairman, who does not have a vote. The expertise of the members of the Board of
Governors must be of an adequate level, as determined by the Nederlandsche Bank (DNB),
in the interests of the participants, former participants and other stakeholders in the fund.
The Board of Governors is required to notify DNB in advance of any change in its com-
position and to notify DNB immediately of any subsequent disclosure concerning a
The Board of Governors is responsible and has authorisation for:
– amendment and adoption of the Articles and regulations of the fund, including the
pension regulations and the administrative regulations;
– implementation or outsourcing implementation of those regulations;
– management of the fund in accordance with the financial policy, which includes risk
policy, investment policy and determination of contribution rate and indexation;
– communication policy;
– entering into service agreements and an SLA with the administrative organisation and
monitoring correct implementation of those agreements;
– entering into obligations with third parties, whereby the chairman, an employers’ member
and an employees’ member jointly represent the fund.
The Board of Governors is assisted in the performance of its duties by an Executive Office,
the responsibilities of which include:
– advising and assisting the Board of Governors, for example in negotiating the implementati-
on agreement with the employers’ and employees’ organisations in the Pension Chamber;
– consultation with the Pension Chamber;
– entering into and monitoring the service agreements and SLA with the administrative
– policy formulation by the Board of Governors;
– compliance with the (statutory) requirements relating to pension fund management,
22 Annual Report 2008 ABP
Five committees have been formed to ensure optimum performance of the duties of the
Board of Governors: the Audit Committee, the Fund Policy Committee, the Investment
Policy Committee, the Appeals Committee and the Remuneration Committee. These
committees act in an advisory capacity. As well as by the committees, the Board of
Governors is also advised by independent bodies which do not include members of the
Board of Governors: the Participants’ Council, the Employers’ Council, the Investment
Committee and the accountability body.
The Audit Committee, which carries out preparatory work for the Board of Governors,
brings together the requisite financial expertise to support decision-making by the Board of
Governors. The Audit Committee monitors:
– the functioning of the risk management and control systems;
– the accuracy of financial accounting;
– compliance with legislation and regulations;
– the integrity of the published financial information.
As well as six members of the Board of Governors, three external experts also have seats
on the committee.
The Fund Policy Committee is responsible for the preparation of policy for the fund’s
(strategic) long-term plan, including financial policy (risks, contribution rate and indexation),
pension policy and administration policy. The committee consists of three members of the
Board of Governors from the employees’ side and three members of the Board of Gover-
nors from the employers’ side and is chaired by the chairman of the Board of Governors.
The Investment Policy Committee is responsible for preparation of the fund’s (strategic)
investment plan and the constraints imposed by the fund, including those relating to ESG
factors. The committee consists of three members of the Board of Governors from the
employees’ side and three members of the Board of Governors from the employers’ side
and is chaired by the chairman of the Board of Governors. The committee consults
regularly with the External Investment Committee.
The Appeals Committee decides on behalf of the Board of Governors on appeals by
interested parties against decisions taken under the fund’s Articles and regulations. The
committee consists of a number of members of the Board of Governors and a number of
independent members appointed by the Board of Governors for their expertise.
The Board of Governors has appointed a Remuneration Committee, which sets constraints
on the social policy of the administrative organisation on behalf of the Board of Governors.
The committee makes preparations for the recruitment and selection of members of the
Executive Board of APG Groep NV, a holding company which also controls the administra-
tive organisation. The mitigated two-tier structure regime is applicable to this holding com-
As shareholder, ABP also determines the remuneration of the members of this Executive
Board, on a proposal by the Supervisory Board of the administrative organisation. The
committee consists of the two vice-chairmen of the Board of Governors, one Member of
the Board of Governors from the employees’ side and one member of the Board of
Governors from the employers’ side and is chaired by the chairman of the Board of
23 Annual Report 2008 ABP
The Investment Committee advises the Board of Governors on investment policy. The
committee of external experts is international in composition, with a profile appropriate to
a body advising on investment policy. The committee was augmented in 2008 with the
appointment of two members, Messrs. Evans and Kjaer.
The Participants’ Council, representing the interests of the participants and pensioners,
and the Employers’ Council, representing the employers in the public and education
sectors, are the principal advisory bodies supporting the Board of Governors and provide
the Board of Governors with solicited and unsolicited advice on policy.
The Board of Governors has outsourced policy preparation, pension administration,
communication and asset management to the administrative organisation. As well as a
master contract, there are also three further service agreements between the pension fund
and the administrative organisation, for pension administration, asset management and
other services. The fund also enters into an SLA each year with the administrative
Internal supervision The Pensions Act requires every pension fund to set up its own system of internal
supervision employing external and independent experts with effect from 1 January 2008.
The Act gives a choice of four different forms: a visitation committee, a supervisory body,
an expanded audit committee or a one-tier-board.
To meet this internal supervision requirement in a manner appropriate to a large pension
fund, ABP’s Board of Governors decided to expand the (existing) Audit Committee by
adding three external and independent members. The external members of the Audit
Committee function in the same way as all the other members of the Audit Committee
except that they are specifically and independently charged with assessing the functioning
of the Board of Governors. The Act confines the supervision exercised by the external
members exclusively to assessing the fund’s policy-making and management procedures
and processes, the checks and balances, the fund’s governance and the way in which the
Board of Governors manages risks in the longer term. The external members may,
however, elect to investigate other aspects in addition to their statutory duties.
The assessment by the external members of the functioning of the Board of Governors is
an extension of the evaluation process which is part of the primary task of the Audit
Committee. The external members of the Audit Committee discuss their findings with the
Board of Governors and report on their assessment in the context of internal supervision.
The Board of Governors took the following action in 2008 in implementation of the internal
– In compliance with Section 106 of the Pensions Act, article 20 of ABP’s Articles was
amended to include internal supervision in the form of an Audit Committee augmented
with three external members.
– By-laws were formulated for the Audit Committee which include internal supervision.
– A profile was compiled by the Board of Governors for external members of the Audit
– The Board of Governors appointed Messrs. De Swaan, Klopper and Crone as external
members of the Audit Committee.
– Several members of the Board of Governors and staff of the Executive Office held
introductory meetings with the external members of the Audit Committee.
24 Annual Report 2008 ABP
Reporting by external Because the external members of the Audit Committee were not appointed until late last
members of the Audit year, they had no opportunity in 2008 to form an opinion based on their findings. Last year
Committee can therefore be seen as a period of preparation for the configuration and implementation
of the system of internal supervision. The external members of the Audit Committee are
starting work in 2009 and will produce a report this year based on their findings, which
they will discuss with the Board of Governors before submitting their final report to the
Co-determination In compliance with the Pensions Act and, before that, the Pensions and Savings Funds
Act, ABP has had a Participants’ Council since 2004. The Board of Governors, being
composed of representatives of employers and employees, considered it important to take
advice from both camps, and therefore created an Employers’ Council at the same time.
Both councils consist of 36 members. The Participants’ Council of ABP consists of 22
employees’ representatives and 14 pensioners’ representatives, who are appointed by the
four trade unions for public-sector personnel (AC, ACOP, CCOOP and CMHF) and the
Dutch Association of Pensioners’ Organisations (NVOG).
In the Employers’ Council, the members of the different segments within the public and
education sectors are represented on a proportional basis. Appointments are made by the
Civil Service Sectoral Association (VSO) and the Energy and Utility Companies Employers
Federation (WENb). Details of the membership of the councils can be found at the end of
this annual report.
The powers and responsibilities of the councils are defined in ABP’s Articles and the
by-laws of the councils.
The function of the councils is to advise the Board of Governors on matters on which the
latter is required by the Articles to request advice and on any other policy matters on which
the councils consider advice necessary.
Pursuant to ABP’s Articles, the Board of Governors must seek the advice of the councils
on the following matters:
– adoption and amendment of the Articles and pension regulations;
– adoption of the contribution rate and indexation percentage;
– adoption of the annual report, the budget, the Actuarial and Business Memo and, where
applicable, the recovery plan;
– transfer of obligations;
– winding-up of the fund.
The Board of Governors thanks the councils for their contribution to the discussions of the
developments affecting the pension fund and all its stakeholders.
The members of the accountability body are appointed from among the members of the
Participants’ Council and the Employers’ Council.
Accountability body ABP appointed an accountability body within the meaning of the Pensions Act on 12
February 2009. It consists of 36 members, of whom one-third are appointed from the
delegation representing the pensioners, one-third from the delegation representing the
participants and one-third from the delegation representing the employers. The affiliated
employers’ delegates are appointed by the Civil Service Sectoral Association (VSO) and
the Energy and Utility Companies Employers Federation (WENb) from among the members
25 Annual Report 2008 ABP
of the Employers’ Council. The participants’ delegates are appointed by the trade unions
for the public and education sectors from among the members of the Participants’
Council. The pensioners’ delegates are appointed by the trade unions and the Dutch
Association of Pensioners’ Organisations (NVOG) from among the members of the
The responsibilities and powers of the accountability body are defined in ABP’s Articles
and the by-laws of the accountability body. The Board of Governors is accountable to the
accountability body for the policy and its implementation and for compliance with the prin-
ciples of good pension fund governance, as referred to in the Pensions Act Implementing
Decree and the Obligatory Occupational Pension Schemes Act (WvB) of 18 December
The accountability body is authorised pursuant to article 2 of its by-laws to give a
– the actions of the Board of Governors;
– the policy pursued by the Board of Governors in the past year;
– the policy choices for the future;
– compliance by the Board of Governors with the principles of good pension fund
governance as referred to in article 19 of the Articles.
This judgment, together with the response of the Board of Governors to it, is included in
the fund’s annual report.
The reports compiled under the responsibility of the Participants’ Council and the
Employers’ Council are included in the next chapter, together with the report of the
On 29 May 1953, Edmund Hillary and his guide
Tenzing Norgay were the first men to reach the
summit of Mount Everest, at 8,848 metres the
highest point on Earth.
Norgay, a Nepalese Sherpa, knew the Himalayas
better than anyone. The son of a yak herder, he
had already taken part in six previous attempts
to conquer Everest. After the successful climb in
1953, he was awarded the George Medal, a top
British medal for bravery. His son Jamling would
follow him to the top of Everest in 1996.
New Zealander Hillary had taken part in a failed
attempt on the summit of Everest in 1951.
Following his successful expedition with Norgay,
he returned six times to the Himalayas in the
1950s and 1960s. Hillary’s life was not all high
E dm un d h illary
points: in 1975, his wife and daughter were
killed in a plane crash while en route to join him.
Ten z in g n or g ay
When his active climbing career ended,
Hillary involved himself with the problems of the
Nepalese people. He was also able to exercise First to reach the summit
political influence on Nepal’s behalf: in 1985, he
was appointed New Zealand ambassador to
of Everest in 1953.
India, Bangladesh and Nepal, a post which he
held for four and a half years. Edmund Hillary,
who died in early 2008 at the age of 88, was
known for his modesty. It was not until 1999,
long after the death of his climbing partner
Tenzing Norgay, that he revealed that he,
Hillary, had been the first actually to set foot
on the summit of Everest on 29 May 1953.
Since Hillary and Norgay, hundreds of people
have climbed to the top of Everest. Junko Tabei
from Japan was the first woman to reach the
summit, on 16 May 1975.
Ten weeks to reach the summit
Katja Staartjes is so far the only Dutch woman to have reached the top of Mount Everest. She has also climbed various other
mountains higher than 8,000 metres. As she explains, if you want to reach the summit reasonably safely, what you need most of
all is lots of patience. Taking ten weeks for a climb is certainly not exceptional.
Katja has been devoted to mountaineering since 1998 and, as well as Everest, has also climbed other giants such as Cho Oyu,
Ama Dablam, Gasherbrum 1 and Dhaulagiri. As she explains, “On average you have a base camp at around 5,000 metres on
mountains like these. You certainly have to count on four to six weeks from base camp to the summit. Firstly, the weather up those
mountains is often bad. And then there’s nothing you can do but wait at base camp. And you also need that time to adjust to the
thin air as that creates a lot of problems for your body. That’s why you climb a bit, set up your tent camp and then go back to
base camp to recover. There is so little oxygen at those altitudes that your body literally starts breaking down. What’s more, you
can hardly eat because all your blood is in your brain, heart and lungs and hardly any in your digestive tract. Once you get back to
base camp, there’s more oxygen and you start feeling hungry again. That’s when you start building yourself up for the next climb,
when you go a bit further up the mountain. When you leave base camp, you take some more equipment with you for your next
tent camp. That means extra ropes, gas to cook with and so on. In that way, it takes you between three and six rounds to reach
the summit. And something will always go wrong when you’re going up and down the mountain. You go back up the mountain,
for example, and the tents turn out to have blown away. In my view, that is the main reason why climbers give up on those high
mountains. They haven’t got the patience and don’t have the mental resources to deal with all the setbacks.”
Her most recent climb was in October 2008, when she got within 30 metres of the summit of Manaslu in Nepal. For various
reasons it was considered too dangerous to climb the last few metres of the 8,163 metre-high mountain. “Obviously we were
disappointed,” explains Katja Staartjes. “But we were also pleased to get home safely. Don’t forget that one out of every twenty
mountaineers doesn’t return alive from these mountains.”
28 Annual Report 2008 ABP
Reports of the Participants’ Council,
Employers’ Council and accountability body
Report of the Participants’ Council
Two members of the Participants’ Council, Messrs. Kleefstra and Roggema, passed away
in 2008. We remember them as highly valued members of our council.
2008 was also an eventful year for the Participants’ Council in many respects.
Considerable time and energy was devoted to complex issues including the introduction of
the Pensions Act, the separation of the pension fund from the administrative organisation
and, of course, the credit crisis and its consequences for the fund and its stakeholders.
Fund position, contribution From the late summer of 2008, the Participants’ Council closely monitored the develop-
rate and indexation ments affecting the fund in the wake of the credit crisis. The council, like the Board of
Governors, could do little more than stand by powerless as the fund lost a substantial part
of its assets and the funding ratio dropped from 140 to 90 per cent, reflecting the abrupt
fall in market prices and the declining market interest rate. During that period, the Parti-
cipants’ Council was frustrated by the obfuscatory language of the reporting on ABP’s
While the Participants’ Council understood why the Board of Governors was unable to
apply structural indexation as from 1 January 2009, it strongly urged the Board of Gover-
nors to consider payment of a one-off benefit to the pensioners. The Participants’ Council
pointed out that it was precisely the pensioners whose purchasing power was being
impaired and who derived scarcely any benefit from the government’s measures. After
lengthy debate, the Board of Governors promised to reconsider indexation in mid-2009, in
the light of the situation prevailing at that time.
Separation of pension Following changes in legislation and regulations, ABP’s Board of Governors decided in late
fund and administrative 2007 to separate the pension fund and the administrative organisation. The consequences
organisation of this decision were discussed at length with the Participants’ Council, resulting in an
amendment to the fund’s Articles with effect from 29 February 2008 on which the Council
gave a positive recommendation. One of the main issues was whether the Participants’
Council which have any influence over the SLA which the fund would enter into with the
administrative organisation each year. The Participants’ Council argued that the way in
which administration was outsourced by the fund was particularly relevant to the parti-
cipants and pensioners. After an in-depth debate, the Board of Governors acceded to the
wishes of the Participants’ Council and gave the Council the right to advise on the SLA.
The Participants’ Council first exercised this right in November 2008, when the SLA for
2009 was finalised, having been involved in the preparatory phase. The Council was also
successful in persuading the administrative organisation to set up a Client’s Council, which
has direct influence on the treatment of participants and pensioners by the administrative
The Participants’ Council considers that the consultancy procedure relating to the
formulation of the profile for members of the Supervisory Board of the administrative
organisation was not executed correctly and has instituted proceedings before the
Enterprise Section of the Court of Appeal. Following intensive discussions covering all the
Council’s questions and observations on the profile, the Council withdrew its action before
the Enterprise Section.
29 Annual Report 2008 ABP
Good pension fund The Pensions Act imposes rules on the organisation of co-determination, accountability
governance and internal supervision by pension funds. ABP instituted an accountability body in 2008
and complied with the internal supervision requirements by appointing three external
members to the Audit Committee (investigative committee), with their own authority to
assess the functioning of the Board of Governors. The Participants’ Council gave a positive
recommendation to the Board of Governors’ proposals concerning these measures and
the related amendment of the Articles, the by-laws of the accountability body and the
by-laws of the Audit Committee. Following the Council’s positive recommendation, the
Board of Governors adopted this amendment of the Articles in August 2008. The amend-
ment was notarially documented on 2 February 2009.
Regular matters More routine matters on which the Council’s recommendation was requested included:
– the fund’s 2007 annual report;
– the annual plan for the second half of 2008;
– technical adjustments to the Actuarial and Business Memo;
– amendments and updates to the statement of investment principles;
– changes to the pension regulations in connection with the relaxation of the existing
anticumulation provisions for those in receipt of income in addition to benefit under the
flexible pension and early retirement benefit scheme (FPU);
– the fund’s new administrative regulations focusing on the affiliated employers.
Report of the Employers’ Council
In Mr. Paul Sieverding, who passed away in 2008, we miss a highly valued colleague.
The Employers’ Council’s objectives in 2008 were:
– to improve and optimise its own functioning;
– to optimise cooperation with the Board of Governors and the Participants’ Council;
– to achieve closer coordination with the Civil Service Sectoral Association (VSO).
The Employers’ Council organised its activities with a view to achieving these objectives.
The Employers’ Council followed a clear line in its recommendations on pension fund
governance, the service agreement with administrative organisation APG, changes to the
regulations, implementation of the accountability body and the decisions on contribution
rates and indexation. It emphasised that the Employers’ Council attaches great value to
transparency in all respects and to clear, timely, accurate and complete communication
and considered it important to maintain a consistent policy line.
In a meeting with a delegation from ABP’s Board of Governors and the Participants’
Council, agreement was reached on improving cooperation between the Board of
Governors and the councils, while respecting each body’s position. In the course of
preparing its response to requests for recommendations, the Employers’ Council organised
meetings among its own members and with other organisations such as the VSO.
With a view to optimising the Employers’ Council’s own functioning, it was decided in
consultation with VSO and the Energy and Utility Companies Employers Federation
(WENb) to take up some of the allocated number of seats on the accountability body.
The configuration and composition of the accountability body was also discussed and
agreed with those bodies.
30 Annual Report 2008 ABP
A delegation from the Employers’ Council consulted first with a delegation from the
Participants’ Council and then with the Board of Governors on the configuration of the
accountability body. The Employers’ Council’s preference was for the accountability body
to consist of a small number of members (a maximum of six per delegation), but it was
finally decided that there would be twelve seats for each delegation.
The Employers’ Council considers the following to be the most important issues in 2009:
– the recovery plan;
– cooperation with the Board of Governors, Participants’ Council and accountability body;
– progress in strengthening its own role and developing its expertise.
Report of the accountability body
The accountability body received the following information from the Board of Governors to
assist in arriving at its judgment:
– draft 2008 annual report;
– draft 2008 financial statements;
– (draft) external auditors’ report;
– (draft) actuarial statement and management summary by the external actuary for the
2008 financial year;
– quarterly reports for 2008.
At its plenary session on 9 April 2009, the accountability body met the external auditors
and the external actuary. The report of the external auditors was not available at that time
and was not presented until after the report of the accountability body had been con-
sidered at the consultation meeting with the Board of Governors and adoption of the final
report for 2008 by the members of the accountability body. The (draft) management
summary was discussed with the external actuary.
No meeting was held with the external members of the Audit Committee because this
internal supervision process did not start until 2009 and the members will therefore not
have had an opportunity to form an opinion concerning 2008. No meeting was held with
the compliance officer. A further meeting will be held with the external actuary later this
year on the review of actuarial assumptions on which a report is to be submitted in the
course of 2009.
A number of questions raised by the accountability body concerning the content of the
draft 2008 annual report and draft 2008 financial statements and the responses to those
questions by ABP’s Board of Governors were discussed at a consultation meeting with the
Board of Governors on 15 April 2009. The meeting also discussed the content of the draft
2008 report of the accountability body. In the coming months, the accountability body will
concentrate on the performance of its other tasks and, in consultation with the Partici-
pants’ Council and Employers’ Council, consider how to proceed with translating task
allocation into operational practice.
The accountability body for ABP has existed for only a short time, having been installed on
12 February 2009. There was relatively very little time, therefore, for the accountability body
to perform its tasks during the process of preparing the annual report and financial state-
ments. Several important documents were not yet available, it was not possible for a
variety of reasons to consult with the external members of the internal supervision body or
the compliance officer and the meetings with the external auditors and the external actuary
were held at the last minute. Despite the pressure of time and the limited information
available, the accountability body accepted the responsibility to perform an assessment of
all aspects of ABP’s function, focusing both on the fund’s performance of its tasks and on
the consultation structures that are conducive to optimum performance.
31 Annual Report 2008 ABP
The accountability body’s findings, its judgment and its recommendations relating to the
activities defined in article 2 of the regulations are presented below, together with the
Board of Governors’ response.
Findings There was a change in the organisational structure of Stichting Pensioenfonds ABP last
year, with the separation of the ABP pension fund from the administrative organisation with
effect from 1 March 2008. The administration has been transferred to APG Algemene
Pensioen Groep NV under a long-term agreement. The main tasks performed by the
administrative organisation on behalf of the fund are pension fund administration, asset
management, communication and services supporting the Board of Governors. This
outsourcing arrangement is defined in a master contract and three subsidiary contracts,
which have been distilled into an SLA for 2009. Management of the strategic, operational
and compliance risks associated with the outsourcing of the various processes requires
the Board of Governors’ constant attention. ABP’s Board of Governors is ultimately
responsible for the management of the fund and the administration of the schemes.
The risks to which ABP is exposed are discussed in Chapter 7 ‘Risk Management’ of the
annual report and in the section on risk in the financial statements. Information is also given
there on ABP’s policy on managing those risks. The accountability body considers that the
report presents a clear picture, but only gives a brief outline of the measures taken by the
Board of Governors to mitigate the effects of the credit crisis in 2007 and 2008 and their
timing. The accountability body has asked the Board of Governors to provide a retrospec-
tive analysis of the measures taken in the context of the credit crisis (and their timing). The
Board of Governors has given an undertaking to comply with the accountability body’s
The accountability body notes that the credit crisis has caused the investment portfolio to
underperform. Given ABP’s prominence and the participants’ understandable wish to be
able to judge whether their pension capital is being professionally managed, this underper-
formance needs to be placed in a broader context. Partly to assist the accountability body,
an historical review of outperformance and underperformance covering several years is
The accountability body fully endorses the policy of the Board of Governors designed to
provide good and affordable pensions for the participants and to preserve a system based
on the principles of collectivity and solidarity.
The accountability body considers that the Board of Governors performed satisfactorily in
2008 in applying to the pension fund the principles of good pension fund governance as
formulated by the Labour Foundation in 2005 and embodied in the Pensions Act.
Good pension fund governance requires a high level of expertise on the part of the Board
of Governors and its individual members. A structured expertise development programme
is required. The accountability body will return to this issue in its assessment of the 2009
As from 1 January 2009, the Stichting Pensioenfonds ABP’s governance was brought into
line with the changes in the Pensions Act and the restructuring of Stichting Pensioenfonds
with effect from 1 March 2008. In this context, the accountability body advises the Board
of Governors to pay special attention to consolidating the new structure and developing
the Executive Office.