“Internal supervision has matured – now it should also be taken seriously”

Internal supervision within pension funds has undergone significant development in recent years. Whereas it used to be mainly about ticking boxes and reading thick files, it is now a field that revolves around looking ahead, forming opinions, and strategic reflection. Peter de Groot, chairman of the Association for Internal Supervision of Pension Funds (VITP), sees it as his mission to further professionalize this development and make it more visible.

The pension sector has numerous stakeholders, including social partners, administrators, politicians, and regulators. What is their specific role, how do they view the sector, and how are they seeing and responding to the new system? In the Krachtenveld (Force Field) column, the parties tell their stories.

De Groot realizes that pensions are incredibly important to society. “I am a strong believer in the second pillar: collective, solidarity-based, and cooperative. There is no profit motive. Administrators and supervisors are responsible for the income of millions of people, earning a salary at the HBO level. No one complains about that. But it is an enormous responsibility.”

De Groot feels this responsibility is not always recognized. “Managers and supervisors stick their necks out, but are sometimes held personally accountable, as was recently the case in the transition to the Future of Pensions Act (Wtp). That is a negative development. If you make mistakes, you should be held accountable. But if complaints are filed by professional complainers, the sector must stand firmly behind its managers.”

Mainly concerned with content
The VITP was originally created as a platform for regulators to share knowledge and exchange experiences. “We were mainly concerned with content,” De Groot recalls. “We were not inward-looking, but strongly focused on professional content, with the aim of helping members do their jobs well. Shortly after I was appointed, the board was renewed. That gave us room to redefine our role.”

Part of this new role is that the VITP is becoming more involved in the public debate. “For example, we responded to the consultation on the Future of Pensions Act (Wtp) and we are now a discussion partner for De Nederlandsche Bank (The Central Bank for the Netherlands) (DNB) and the Authority of Financial Markets (AFM).” The VITP actively seeks dialogue with these supervisory authorities. “That is a conscious choice: we want internal supervision to be taken seriously in The Hague and Amsterdam as well.”

De Groot believes this is desperately needed. “We are the gateway to external supervision, and I see that internal supervision has matured. We are no longer just people who give their opinion after the fact. We are also strategic discussion partners. And that requires professionalism, reflection, and courage. But it also requires recognition. Internal supervision is not a side issue—it is an essential part of good pension governance.”

Asking questions
He believes this also applies to an important aspect of transitioning, specifically regarding communication with participants. “How have you prepared for communication with participants? We often hear: ‘Good question. We’ll pass that on to our administrator.’ It’s just one example, but it’s our job to ask those questions.” It’s just one example, but De Groot is convinced that communication with participants is crucial. “For twenty years, we have failed to explain properly that what we do is the best thing for the participant. We achieve high returns at a low price. That could be communicated more clearly.” He believes this is another task for internal supervision. “We still communicate what people ‘will get’, with a footnote that it may vary.

But soon people will understand their pot. As a supervisor, you need to know what that means—and question the board about it.” He warns of the fine line between supervision and management. “Supervisors should not tell people their opinions, but they should ask the right questions. You have to assess the process, but also understand the outcome.”

Professionalism as a core value
He does see challenges, however. “We are in a long-cycle sector, but with the arrival of the Wtp, we are facing a short-cycle issue. The periodic matching of investments and liabilities requires faster decision-making. You can no longer hold meetings once every six weeks. That calls for a different type of governance.” De Groot is aware that the changing role of internal supervision and the changing sector also require different competencies from directors. “We are still using job profiles that belong to the financial assessment framework (FTK), but the Wtp requires something different. Knowledge of integrated management and change management is becoming more important. The sector needs to think about this.” He therefore advocates for more precise job descriptions. “A fund recently sought new directors. If sixty people respond, then in my view, the text is too general. Make it more specific. Select candidates based on competencies that fit the new reality.”

These are issues that the VITP, led by De Groot, is pushing for. “Our supervisory plan is tailored to the culture, risks, and risk appetite of the fund. We look at the quality of directors, the coverage ratio, and governance. This is fundamentally different from the risk-based supervision of DNB, for example.” The VITP is strongly committed to professionalization. We organize knowledge sessions, peer review, and an annual conference. The conference is also open to non-members and aims to send people home with questions, not answers. We want to encourage people to think for themselves.” According to De Groot, the knowledge sessions are an important tool. “We share best practices, templates, and ensure knowledge transfer. This is done via Teams, as well as in person. And we are seeing that members appreciate this.” De Groot is proud of what has already been achieved. “But we must continue to reflect, continue to learn, and continue to challenge. Internal supervision has matured. Now it must also be taken seriously – by supervisors, directors, and the outside world.”