NETHERLANDS - The pension fund for food manufacturer Hero has completed a €44m ($58m) buy-in deal, the first of its kind in the Netherlands.
The pension fund used a UK-developed buy-in solution which does not require member or regulator approval, enabling a faster transaction. As a result, Hero was able to liquidate its pension fund and secure the best deal for its members, said pension provider Aegon.
Hero Benelux chief financial officer Jop Peek said: "We were faced with a dilemma - we knew we had sufficient funds in the pension to perform a buyout at that moment - but we had to have the agreement of both the regulator and our participants first. If we waited until we had received permission for a buyout, there was a high chance that we would no longer be able to afford it, as the financial markets were so volatile."
On December 8, 2009, Hero was able to derisk its pension plan using a buyout for its inactive participants. In addition, it was able to agree a guaranteed insurance contract for its active participants. Using the remaining funds, Hero was able to provide indexation for both active and inactive participants, said Aegon.
Hero's buy-in has led to an increased interest in this form of de-risking, Aegon added.
Aegon actuarial consultant Edo De Wit said: "The Hero buy-in shows that the buy-in has a useful role to play in helping Dutch pension funds to de-risk their defined benefit plans. The buy-in provides pension funds with an agreed price (as the nominal rights are insured with the insurance company) which gives them the time they require in order to receive consent from both the participants and the regulator for a buy-out.
"There is certainly interest in the Dutch pension fund market for a solution like this - and Aegon is presently talking with at least two pension funds about a similar kind of solution."
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