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Tjb hulshoff i pension solutions kcm presentations 23 april 2015-v20150421th

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Tjb hulshoff i pension solutions kcm presentations 23 april 2015-v20150421th

  1. 1. 1
  2. 2. A standard, yet very different PPI Kempen Capital Management seminar ‘Hollands Glorie’ De toekomst van ons pensioenstelsel: In search of the Holy Grail April 23, 2015 24/04/2015 Private and Confidential
  3. 3. 3 And now for something completely different... • DC has the future • ...as despite common myths.. • ...the underlying trend is unassailable • PPI is the best vehicle • ...supported by massive growth... • ...and now breaking barriers.... • ...acting in the interest of participants • Further improvement is on the way • ...yet myths are tenacious... • ... and participant interests should outweigh providers’ interest.
  4. 4. 4 And now for something completely different... • DC has the future • ...as despite common myths.. • ...the underlying trend is unassailable • PPI is the best vehicle • ...supported by massive growth... • ...and now breaking barriers.... • ...acting in the interest of participants • Further improvement is on the way • ...yet myths are tenacious... • ... and participant interests should outweigh providers’ interest.
  5. 5. 5 1605 1st “pension” State elderly pension 1956 No more early age retirement 2011 g 1st fund 1970 -1990 Early retirement 65 -> 67 72 DB to DC 1845 Final pay avg. pay 2000 -2008 2004 2011 2011 g PPI growth 2014
  6. 6. www.ingim.com 6 We look into the future and we see....
  7. 7. 7 7 The current system is merely scratched
  8. 8. 8 ...as despite common myths... 1. DC leads to unpredictable pension 2. DC does not contain collectivity and solidarity 3. DB has higher returns, because of intergenerational solidarity 4. DC requires participant choices, and thus leads to errors 5. DC is more expensive for it is often executed by for-profit parties
  9. 9. 9 ...the underlying trend is unassailable. 2040 0 1 2 3 4 5 6 7 8 9 1950196019701980199020002010202020302040205020602070208020902100 Number of workers per 65+ Bron: i-PensionSolutions, United Nations
  10. 10. 10 0 2 4 6 8 10 12 14 2015-04-16 2013-12-02 17-7-2012 3-3-2011 19-10-2009 4-6-2008 19-1-2007 6-9-2005 22-4-2004 9-12-2002 25-7-2001 10-3-2000 27-10-1998 12-6-1997 29-1-1996 14-9-1994 30-4-1993 17-12-1991 2-8-1990 20-3-1989 4-11-1987 20-6-1986 5-2-1985 22-9-1983 10-5-1982 24-12-1980 10-8-1979 10 Year Dutch bond yield ... the underlying trend is unassailable Private and Confidential 0 3 6 9 12 15 18 21 Cost Cost of € 1 annuity >33x the price Bron: i-PensionSolutions
  11. 11. 11 ...the underlying trend is unassailable. 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 1999 2005 2010 2014 Number of participants in DC (Netherlands) 0 5 10 15 20 25 1999 2005 2010 2014 AUM(€bln) AUM in DC (Netherlands)
  12. 12. 12 And now for something completely different... • DC has the future • ...as despite common myths.. • ...the underlying trend is unassailable • PPI is the best vehicle • ...supported by massive growth... • ...and now breaking barriers.... • ...acting in the interest of participants • Further improvement is on the way • ...yet myths are tenacious... • ... and participant interests should outweigh providers’ interest.
  13. 13. 13 Rigid expense management
  14. 14. 14 PPI is the best vehicle (cost) Source: LCP [2014] Source: LCP [2014] Source: Towers Watson [2011 (!)]
  15. 15. 15 PPI is the best vehicle • Proven concept • Lowest cost • Inherently innovative • Participant focused • VAT exempt • Ringfencing • Regulated in The Netherlands • Suitable for: • DC scheme • Net pension • CDC scheme • Run-off portfolio • Separated account • Europe • (self employed, currently excluded by law)
  16. 16. 16 ...supported by massive growth • Significant growth in AUM and premium • Large corporations looking into PPI • (political) perception has changed € 113 € 132 € 145 € 171 € 241 € 291 € 380 € 512 € 658 € 935 € 1,241 0 200 400 600 800 1,000 1,200 1,400 2012K2 2012K3 2012K4 2013K1 2013K2 2013K3 2013K4 2014K1 2014K2 2014K3 2014K4 AUM(€mln) PPI market Bron: DNB
  17. 17. 17 ...and now breaking barriers Private and Confidential The first open architecture Premium Pension Institution
  18. 18. 18 ...and now breaking barriers • i-PensionSolutions • open platform • serves the interest of participants • Open platform facilitates: • customers to create and maintain tailor made solutions • asset managers and insurance companies to offer core business products to their client base, integrated within a total pension offering • development of (optional) guarantees • next generation DC products to be built 6
  19. 19. 19 Strategic choices: • IPS is set up as a foundation. Its sole purpose is to serve and protect the interests of the pension scheme participants and is a not-for-profit organization • Only best-in-class partners, • stringent due diligence and compliance • Operational excellence • Distribution through partners • SwissRe offers re-insurance, Credit Suisse capital market guarantees • Initial start in The Netherlands, European ambition • Optional guarantees (capital market and insurance) Core values: • Protect the interests of the participants • Transparency • Integrity • Independent • High standards for access to platform • Strong compliance framework • Clear governance • Cost efficient • Committed for the long term (and strongly capitalized) ...and now breaking barriers
  20. 20. 20 Synergy from cooperation
  21. 21. 21 Committed, yet open
  22. 22. 22 Best of all worlds • i-PensionSolutions offers Pension Savings Product • Employer selects asset manager and investment strategy • Employer can select Insurance Company and Insurance Cover • Pension Administration and integrated communication is executed by i- PensionSolutions • The employer signs two agreements: • [A] Pension Execution to cover Asset Accumulation (as described before) and, • [B] Insurance Policy Agreement (Pension Insurance Product) to cover Biometric Risk insurance with an insurance company Asset Manager Administrator Stichting International Pension Solutions (regulated pension entity) Administration Asset Management [Employer] (Former) Employees Pension Agreement Pension Execution Agreement Claim on vested rights Custodian Management Board Supervisory Council External Advisors Order Execution/ Custody Investment PolicyAdvise on: Legal, Tax, Actuarial Investment, Risk Mngt Investment Committee Asset Liability Committee Insurance company Insurance Insurane Policy Agreement
  23. 23. 23 ... acting in the interest of participants Independent governance and dedicated products Standard Tailor made Plain vanilla Advanced - Allocation based on time to maturity. General set-up - Allocation based on time to maturity - Client specific - Allocation depending on (a.o) funding & standard guarantee Fully client specific, both guarantee and investment scheme Level of tailoring Levelofsophistication SME, Corporates] Large corporates, multinationals, other collectives, Corporates Multinationals, large other collectives
  24. 24. 24 And now for something completely different... • DC has the future • ...as despite common myths.. • ...the underlying trend is unassailable • PPI is the best vehicle • ...supported by massive growth... • ...and now breaking barriers.... • ...acting in the interest of participants • Further improvement is on the way • ...yet myths are tenacious... • ... and participant interests should outweigh providers’ interest.
  25. 25. 25 ...yet myths are tenacious • Lifecycle invests in equity for young people because of ‘investment horizon’ • A longer ‘investment horizon’ leads to higher return • Flywheel of disbursements • With pension funds, retirees retain investment exposure • Longevity risk can be mitigated in a collective
  26. 26. 26 What will ‘doorbeleggen’ bring us?
  27. 27. 27 Prerequisite for ‘doorbeleggen’ • Prevent money death • Individual economic ownership • Executable • Tailoring to individual • Flexible Risk attittude Risk capacity Risk position
  28. 28. 28 ... and participant interests should outweigh providers’ interest. Source: i-PensionSolutions: “Doorbeleggen en verbeteringen in Defined Contribution” 2015. denationalepensioendialoog.nl/item/596 Risk willingness Risk capacity High HighLow Low Annuity Cash / Lump sum ALDA | Partial annuity Continue lifecycle ALDA | Partial annuity ALDA | Partial annuity
  29. 29. www.ingim.com 29 Within the next 5 years, my pension will be with a PPI
  30. 30. A new road towards modern and innovative pension solutions in Europe
  31. 31. Appendix: Various slides
  32. 32. 32 Unfunded plan on Balance Sheet Partial buy-out / LDI solution Insurance Solutions Transfer risk to insurance vehicle Low Required Initial funding (necessary liquidity for single premium) HighLow RiskReduction High Cash injection into pension plan/ traditional asset allocation Change plan benefits (DB DC) Traditional full buyout (Insured annuities) Close fund to new entrants and accruals (hard freeze) Close fund to new entrants Asset Management Solutions Manage Risk-Return Cash Injection/ LDI solution Change in employee benefits Transfer risk to employees Insurance SolutionsAsset Management SolutionsPlan Design Solutions Diagram 1: Illustrative Example of Pension Risk Management Solutions Current Current ... the underlying trend is unassailable
  33. 33. 33 A longer ‘investment horizon’ leads to higher return Private and Confidential • Longest, reliable data goes back to 1871 • Only nine complete, independent series of 15 year return • Statistically infeasible to make valid forward looking statements 0 100 200 300 400 500 600 700 800 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 jaars rendementsperiodes 1871 1886 1901 1916 1931 1946 1961 1976 1991 2006 Bron: RobertShiller,i-PensionSolutions
  34. 34. 34 Growth and Inflation are drivers of interest rate -5 -4 -3 -2 -1 0 1 2 3 4 5 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Real GDP growth (Euro) Source:IMF World EconomicOutlookApril 2015 0 0.5 1 1.5 2 2.5 3 3.5 4 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Inflation ( Euro) Source:IMF World EconomicOutlookApril 2015
  35. 35. 35 Interest rate is rightfully low. But perhaps too low? • The "Yuppie/Nerd Ratio" compares the number of 25-to 34-year-olds ("Yuppies") to the number of 45-to 54-year-olds ("Nerds"). • This ratio is said to do a good job of tracking the demographic pressures on long term interest rates. • Nerds buy bonds for retirement, Yuppies borrow to buy houses, cars, cribs, etc. 0 1 2 3 4 5 6 7 8 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 10yearrate YuppieNerdRatio Yuppie Nerd Ratio (Netherlands) Yuppie / Nerd (LHS) 10year rate (RHS) Regressed value Source: Datastream, Census Bureau, ING Investment Management
  36. 36. 36 Risk of underfunding weighs heavily on sponsors (or whomever bears the risk) Private and Confidential 0 2 4 6 8 10 12 14 16 18 20 85 87 88 90 91 93 94 96 97 99 100 102 103 105 106 108 109 111 112 114 115 117 118 120 121 123 124 126 Fundingratiopoints Funding ratio Estimated value 1 year guarantee of additional funding Bron: i-PensionSolutions
  37. 37. ©2014 IPS. All rights reserved. You are not permitted to create any modifications or derivatives of this presentation or to use it for commercial or other public purposes without the prior written permission of IPS. This presentation is for information purposes only and contains non-binding indications as well as personal judgement. It does not contain any recommendation, advice, solicitation, offer or commitment to effect any transaction or to conclude any legal act. IPS makes no warranties or representations as to this presentation’s accuracy, completeness, timeliness or suitability for a particular purpose. Anyone who interprets and employs this presentation shall do so at his or her own risk without relying on it in isolation. In no event shall IPS or any of its affiliates be liable for any loss or damages of any kind, including any direct, indirect or consequential damages, arising out of or in connection with the use of this presentation. Important Information

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