Light at the end of the tunnel

1. European Pensions - Netherlands Summit Light at the end of the tunnel Tim BurggraafNetherlands tim.burggraaf@mercer.com

2. Today’s agenda • 08.30 – 09.30 Registration and Coffee • 09.30 - 10.00 Chairman’s opening: Tim Burggraaf, Principal, Mercer • 10.00 – 10.30 Advocacy: the CFA Netherlands’ view in the financial crisisRik Albrecht, Communications, Technology & Vice President, CFA Netherlands • 10.30 – 11.00 The recent market turbulence: what went wrong in the analysis of the interest rate sensitivity of the average Dutch pension fund?Geert-Jan Troost, Senior Consultant, Watson Wyatt • 11.00 – 11.30 Morning coffee • 11.30 – 12.00 The Importance of Emerging Markets to Global GrowthChris Taylor, Investment Director, Head of Research and Fund Manager, Neptune Asset Management • 12.00 – 12.30 Investing in Gold: The Strategic CaseRozanna Wozniak, Investment Research Manager, World Gold Council • 12.30 – 13.00 Fiduciary ManagementPhilip Jan Looijen, Director Fiduciary Management, Mn Services • 13.00 – 14.00 Lunch • 14.00 – 14.30 SRI: Government Green Bonds Christopher Flensborg, Coordinator, Capital Markets, SEB • 14.30 – 15.00Global Reits: Is it time to Invest?Simon Hedger, Managing Director - Portfolio Management Property Securities Principal Global Investors • 15.00 – 15.30 The positioning of Netherlands in the emerging European cross border pension marketJacqueline Lommen, Senior Principal, Hewitt • 15.30 – 16.00 Building pensions for the future - What the Dutch can learn from other countriesJohan van Egmond, Regional Director for the Benelux, France and Spain, AEGON Global Pensions • 16.00 Drinks reception

3. Once upon a time (not so lang ago), there was… • Standalone country with a queen (guilder) • People solidary (VUT, final pay) • Widespread social provisions (ZW, WAO, AWW) • Almost 1,000 pension funds • € 850 billion pension assets • Pension is invisible (is taken care of, right?) • AEX at 700 points • Banks can be trusted without question • Every year in winter time, the Dutch go skating

4. Once upon a time (not so lang ago), there was… • Part of Europe (euro) • Solidarity is an issue (generations) • Personal social responsibility • 650 pension funds left • € 600 billion pension assets • Pension clearly visible (media) • AEX has seen 200 points • Banks suffered brand damage • Dutch swim rather than skate • Tennis arm turned into Wii arm

5. Welcome in this new reality …“the age of uncertainty” • Everything is insecure • Volatility stock markets • Life expectancy keeps increasing • Solidarity decreases • Solvency rate causes tension • Solvency frameworks are tested (again) • Where are we in the economic climate? • How do we manage DC risks? • Is the Dutch model still tenable?

6. .. the world has changed …

7. … the world has changed … “The world of retirement has changed and we live in a defined-contribution world now.” Karen Salinaro, IBM's VP of Benefits and Compensation

8. Mercer Netherland’s Snapshot Survey 2009 (sponsors)

9. Mercer Netherland’s Snapshot Survey 2009 (sponsors)

10. Mercer Netherland’s Snapshot Survey 2009 (sponsors)

11. Development solvency ratio’s Dutch pension funds Tenability of the current model? Sources:31-12-2007 (144%) to 31-3-2009 (92%) : DNB31-3-2009 (92%) to 31-8-2009 (106%) : Mercer projections

12. Let’s be proud of our Dutch pension model …Melbourne Center for Financial Studies & Mercer Grade B “A system that has a sound structure, with many good features,but has some areas for improvement that differentiate it from an A-grade system”

13. .. but let’s also be realistic !What is the effect of doubt under plan members? Can we deliver? • When will I retire and how much pension will I receive? • Will it be 65, 67 or …? • Suppose my pension is inadequate, what do I do? • Who will pay for that (as in: who do I sue?) • What about my house? • And what about my savings (part with Icesave and the rest with DSB)? • First insurance companies with “woekerpolissen”, then banks were hit by the economical crisis and now pension funds are missing out on indexation (and maybe even some accrual loss). Who can I trust?

14. Innovation of the modelIssues with DB plans • Indexation freeze with pension funds • Long term loss of spending power older members • Active accrual hit, although not tangible yet • Possibly correction in better days • Correction (“afstempelen”) of accrual for actives • Active accrual hit, although not tangible yet • Possibly complications during asset transfers • Collectief DC (CDC) • The time of running out of money has proven to not so far away • Was the dowry big enough? Was de contribution high enough? • Did we explain the transition well enough and was is actually understood by members?

15. Innovation of the modelIssues with DC plans • The Dutch DC tax ladders will not provide adequate benefits, because of construction flaws (both fundamentally as well as assumption wise) • Individual DC plans assume commitment from young members with their plan • The usury policies (“woekerpolissen”) have placed DC plans in bad lighting with little of no nuance, causing “brand damage” • Both pension funds and plan sponsors do not invest enough in the execution of their duty of care • Regulator (AFM) concludes that insurers do not properly execute their duty of care (August 2009) • The Dutch DC Market needs further evolution (p.e. Master Trusts)

16. Is our pension model retiring?Time for innovation – back to the drawing board • What is a modern level of pensions? • our “70%” or derivatives might be from another era • Is that level still valid? • Which model fits to our current society, keeping in mind • Level of solidarity • Personal responsibility or paternalism? • Position of pension assets relative to other assets,i.o.w. what should be the role of the second pillar? • What does the client think? • Does the client want the best product?

17. European Pensions Netherlands Summit Light at the end of the tunnel Tim BurggraafNetherlands tim.burggraaf@mercer.com