How well are pension administrators taking care of their own pension? Emile Toes represents his colleagues in the management board of the staff pension fund of APG. Approachable and with a straightforward mentality, but also stubborn where needed. “Results are especially achieved when there's a certain degree of friction.”
During pre-Corona times Emile Toes was regularly approached by his colleagues at the coffee machine, being a manager of the staff pension fund of APG: “Tell me, why has the pension contribution increased?” Or: “I hear the partner pensions will be retrenched, what's that all about?”
“Those types of decisions have an immediate impact on people's wallets,” Toes says. “No wonder they have questions about it. I then try to explain why such decision is necessary and what factors played a role in the considerations of the management board.”
No, he has never secretly avoided the coffee machine and, with that, the confrontation with colleagues. “I consider it an advantage for us managers to be present in the workplace. How often do you meet an ABP manager as a teacher or staff member of the defense department? One-on-one contact is impossible if you serve millions of participants. For us, as a small and independent company pension fund, the threshold is low and the lines nice and short.”
Toes has been a manager for the past two years on behalf of the employees in PPF-APG, providing the pension for 7000 participants of whom 2200 are active. In daily life, he works as a business consultant at APG. In that role he calculates, among other things, pension schemes and thinks along about the service provision to the associated funds. Toes therefore wears different hats: he is an employee of APG, participant and manager of the own pension fund and, in that latter role, also a customer of his own employer. Some type of Droste-effect you could say.
How do you keep those roles separated?
“You always have to ensure avoiding any semblance of a conflict of interest. It helps that everyone is aware of my double hat, I am very open about it. I do not perform any direct activities for PPF in my daily work at APG. And if, for example, an advice of APG is discussed during a board meeting to which I contributed, I don't cast my vote but step out to drink a cup of coffee. It also is an advantage fulfilling those different roles. Because I know a lot about pension administration, I am able to provide the management board with plenty of input.”
Why do you think were you elected as a board member back then?
“I have no doubt that my fellow candidate would have been suitable for this role as well. Perhaps I was eventually elected because I don't want to be technocratic but open and accessible. Managers are like people: complicated political hassle sometimes occurs because they want to do justice to all the interests involved or want to convey a difficult message in a less disturbing way. But it's better to just be honest and straightforward: saying you had to make a tough decision that may have a negative impact on some people.”
Can you give an example?
“Take the retrenchment of the partner pension for instance. A decision made by the social partners which is then assessed and executed by the fund. That was quite a significant adjustment, but one that was needed to keep the pension affordable in the future. This led to concern and dissatisfied reactions from some participants. I will then explain such decision: one-on-one, often more than an hour. Those conversations are not always pleasant and sometimes it is impossible to reach substantive consensus. But the exchange of views is still valuable. Another difficult topic is indexation. For the fifth year in a row we will also not be indexing in 2022, no matter how much we may want to. Our policy coverage ratio is 107.5 percent, which is lower than the legal requirement of 110 percent, even though we are moving into the right direction. That's something we try to explain thoroughly, for example during the participants’ meetings or the annual pensioners’ day, which, by the way, are both held digital since Corona.”
It may become possible to index at a coverage ratio of 105 percent in the future. Good news?
“Yes, but you also have to look to the future. It should not be the case of us indexing and having to cut back again in two years’ time because the coverage ratio has decreased too much. We want to avoid yo-yo policy. Moreover, it has to be balanced: if the payment of pensioners increases, what will be the consequences for the active participants? That are the things we discuss in the management board.”
And you obviously represent the interests of the employees within the board…
“The management board is constituted with equal representation: we have seats on behalf of employers, pensioners and employees. But we are not segregated, as managers we all look beyond the party we represent. It involves a lot of money and major interests. This means I cannot afford only highlighting the perspective of the active participants. I am a member of the board on behalf of everyone, also the pensioners and the sleepers.”
Not all employees of APG participate in the staff pension fund. Several hundred employees are accruing pension through ABP. Does that lead to mutual tensions?
“It is the product of historical development. If two employees hold the same position but are both participating in a different pension fund, a comparison can easily be made. The coverage ratios are not equal, for instance. People also often think that we are more expensive than ABP. Indeed, the fixed costs are a challenge for a small fund because those costs have to be distributed among a smaller group of participants. That is why we, as the management board, aim for a further decrease of the costs every year, both in terms of administration and asset management. The investment policy is also compared quite often as we are both relying on APG for our asset management. When ABP announced to no longer invest in fossil materials, the staff pension fund also received questions from participants: ‘Will you be abolishing investments in fossil fuels as well?’ Or actually: ‘You won't be abolishing investments in fossil fuels, do you?’”