a.s.r. vermogensbeheer: Balance sheet management under the Wtp

August 22, 2025

^{This article was originally written in Dutch. This is an English translation.}

The Future Pensions Act is bringing about a fundamental change in the balance sheet management of pension funds. What does this look like and what does it mean for the responsibilities of pension fund directors?

By Stefan Ormel, Client Solutions Manager, a.s.r. asset management

As with any company, the balance sheet and profit and loss account provide a good insight into the financial risks. The transition from the Financial Assessment Framework (FTK) to the Future Pensions Act (Wtp) marks a fundamental shift in balance sheet management. What does this look like?

Under the FTK, a (conditional) benefit is promised. The equity capital – or buffer – of a pension fund is equal to the pension assets minus the cost of future benefits. If the equity capital threatens to fall below the required level, the supervisory authority will become involved and a recovery plan must be submitted.

The most important factors influencing equity under the FTK are:

• interest rate mismatch (difference between the return on the matching portfolio minus the change in value of liabilities as a result of interest rate changes).
• return on business assets (minus financing interest).
• changes in and results on longevity risks.
• premium result (difference between premiums received and the cost of the promised pension benefits).
• indexations or discounts.

In addition, operating results have an effect on equity, but under the FTK these usually have a relatively limited contribution compared to the above-mentioned effects.

From the perspective of pension fund managers, this financial structure is considered relatively safe, given that most factors cannot be directly influenced. If the equity capital becomes too low (or even negative), this is likely to be due to returns on the financial markets, the fact that people are living longer, the fact that the contribution was insufficient, or indexations that were too high in the past. Moreover, most effects have the same impact on other pension funds, which means that everyone is more or less in the same boat.

This will change significantly under the Wtp.

Fund assets versus pension assets

Under the Wtp, there will be an explicit distinction between:

• fund assets: the assets held to guarantee the continuity of pension provision (in effect, the assets of the pension product provider).
• pension assets: the assets intended for allocation to participants, including the solidarity buffer and any compensation deposit (i.e. the pension product itself).

In this structure, what are the main drivers of changes in equity? When does a pension fund encounter solvency problems under the Wtp?

The important drivers under the FTK no longer have any effect on the pension fund's own capital under the Wtp. This is the basic idea behind a contribution agreement: the payment risks are borne by the participant. The pension administrator still makes this transparent to the participant by converting the accrued capital into an expected benefit. However, the effect on the pension fund's equity is nil: investments = promised capital = present value of benefits.

Does this mean that the board bears no responsibility for this? Of course it does! The pension fund is and remains responsible for delivering a sound financial product. The alignment between the risk appetite, investment beliefs, allocation rules, investment strategy and investment implementation plays a particularly important role in this regard. As the provider of the pension product, the pension fund board can certainly be held accountable for this. However, this does not immediately put the continuity of the fund under pressure.

This is only the case if the pension fund (as the provider of the pension product) gets into trouble because of a shortfall in the fund's assets. This can happen if, for example:

• the actual implementation costs differ significantly from the costs provision included for this purpose.
• errors occur in the implementation as a result of poor data quality.
• there are high costs arising from legal proceedings.

there is a negative result on collective insurance (e.g. disability).

the fund assets generate a negative return.

These items are not fundamentally related to the financial risks of the pension product itself, but to controlled and cost-efficient business operations.

The quality of business operations is therefore key to the balance sheet management of a pension fund under the Wtp. The board of the pension fund will therefore have to think very carefully in advance about a realistic estimate of the implementation costs (and set aside a provision for this) and make a realistic estimate of the other operational risks (and set aside an operational reserve for this). Accepting the assignment to implement the pension scheme at a certain cost level creates the necessary responsibility and must therefore be taken after careful consideration.

What if there is a shortfall?

Many pension funds had the FTK in mind when drawing up their transition or implementation plans, whereby all shortfalls could be financed from the large pot, for example from the solidarity buffer. That time seems to be well and truly over.

Even if a loophole were to be found to finance this deficit from the pension assets, you would still have some explaining to do, both to the supervisory authority and, more importantly, to your participants.

The alternative? Go back to the employer (the sponsor) and indicate that, as a director, you have been a little too optimistic in your assessment of the pension scheme and that you need additional funding to plug the gaps? That is possible, but the question is whether the employer will agree to this. Because let's face it, if another pension provider is willing to take on the assignment at that point and do so at lower implementation costs, switching could well be a realistic option.

To the point

The task for pension fund directors under the Wtp is clear: to offer a sound pension product based on controlled and efficient business operations. Under the Wtp, the latter in particular has a direct impact on the solvency of the pension fund. In order to manage this effectively, directors must have insight into all financial and non-financial risks and their ultimate consequences. The pension fund that can offer the most efficient, error-free pension administration and assess, manage and price the associated risks will have the best chance of surviving the coming consolidation.