De Nederlandsche Bank (DNB) president, Olaf Sleijpen, has told Dutch pension funds that they are too reliant on non-European IT providers, which must be reduced.

Speaking at the Netspar Pensions and Science Conference yesterday, 31 March, in The Hague, Sleijpen focused on the resilience of Europe as a whole, the Netherlands, and the pension sector in the face of an uncertain economic and geopolitical situation.

“In a world where power politics is on the rise, Europe must reduce its dependencies. Particularly in areas of vital importance: defence, energy, water, technology – and our financial infrastructure,” he said.

On how pension funds could improve their resilience, he highlighted a move away from non-European IT providers.

“One of the issues here is the reliance on non-European IT providers. A foreign ‘kill switch’ for Dutch pensions does not sound like an ideal scenario. That reliance must therefore be reduced. That is why fully-fledged European alternatives are needed. That takes time,” he said.

He said European alternatives already exist and funds should be “seriously considering” utilising them.

“In doing so, it is beneficial for pension funds to collaborate, in order to overcome a potential ‘first-mover disadvantage’ and create critical mass to promote the viability of European suppliers,” he added.

Furthermore, he said resilience requires pension systems that can withstand shocks, and he believes that the new Dutch pension system will help to achieve this.
“The new pension contract makes pension funds more resilient to shocks, as pension payments will adjust accordingly. The pension product is also becoming more personalised. This offers the opportunity to better align the risks to which participants are exposed with their risk preferences and risk tolerance,” he said.

At a European level, Sleijpen, who is a supporter of the European Savings and Investment Union, said saving for retirement and capital markets cannot be viewed in isolation from one another.

He believes a shift towards funded pensions could “go a long way” in mobilising the €10trn that sits in low-interest bank accounts.

Indeed, venture capital was highlighted by Sleijpen as a key area requiring investment, as almost 30 per cent of European unicorns (European companies with a market value of over €1bn) have left the continent since 2008, mostly for the United States.

“Mobilising it as venture capital that enables European companies to innovate and grow, without having to cross the Atlantic. Furthermore, funded pensions naturally help to prevent poverty among the elderly and to alleviate the pressure on public finances resulting from an ageing population,” he stated.

“European initiatives to strengthen such funded pension schemes, particularly in countries where they are currently inadequate, therefore deserve support.”

He therefore called on the Dutch pensions sector to back the European Commission’s proposed pension package to boost supplementary pensions, noting that EU initiatives are often viewed with a “critical eye” in the country because it already has a well-established pension system.

Sleijpen argued that there is a “bigger picture” and to “not get lost in the details” as “sound pension systems contribute both to income security and to a strong, innovative economy in Europe”.

“There are pension schemes where restrictions on the investment of pension capital limit funds to such an extent that it is difficult to generate a return. The encouragement for member states to consider the scale of their pension funds is also a positive development. The Commission is also rightly focusing on cost transparency and participant protection,” he stated.

---