“Not everything is a battle, I had to learn that”

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?’”

And what was your reply to those questions?

“We want to take our time for careful deliberations on that matter. As the board, we work according to a certain model: Imaging, the formation of an opinion and decision-making. The first thing we are doing at the moment, is thoroughly mapping all consequences. We also consider the base of support among our participants. As it happens, we had just conducted a survey on responsible investing prior to the decision made by ABP. About 70 percent of the respondents believes we are allowed to be somewhat ambitious in that field. We also received questions from participants earlier this year about our interest in mining company Glencore, due to human rights violations during the extraction of cobalt. As the management board we then decided to no longer invest in Glencore.”

How much influence can you exert with invested assets of 1.7 billion euros, versus the hundreds of billion euros invested by ABP as the largest pension fund of the Netherlands? Don't you feel like a tiny mouse opposite a giant elephant?

“We are mainly seeking cooperation with other parties. As an individual investor, that amount of 1.7 billion does not gain us a lot of clout on a global scale, no, that's something you have to be realistic about. A fellow member of the board described that somewhat ironically the other day, with a fictitious newspaper headline: ‘PPF-APG gives China its final warning’. Yet, as the management board we are one hundred percent committed to realizing an as good as possible and responsible pension for our participants using those assets, regardless of the volume thereof.”

Many pension funds struggle with the communication towards their participants who find the information often way too complicated. You probably don't have those difficulties.

“There are plenty of people working here who are able to calculate the contribution themselves, that's true. But we also have participants whose UPO, the Uniform Pension Overview, is immediately tossed into a drawer. There are of course also people working here who are involved in other things than pension administration, such as IT or data management. Moreover, our communication also has to be understandable to partners and children of participants. This means we are just sharing all the basic information. At the same time, a relatively high number of participants have indeed more knowledge on pensions than the average company. So, at times we have to look for the proper level of communication. That is also one of the reasons why I like to engage in those personal conversations. Those conversations provide an opportunity for a more in-depth explanation.”

Why has PPF-APG not opted in the new pension system, given that higher level of knowledge, for the Flexible Contribution Scheme in which the participant bears more responsibility?

“The social partners have provisionally opted for the Solidary Contribution Scheme (in which investments are made collectively, ed). The decisive factor in this decision was the importance of solidarity. The Flexible Contribution Scheme does not allow for the sharing of investment risks. The choice is not final though, it is a working hypothesis. We do have the intention of switching to the new system as one of the first funds in the Netherlands, per January 1, 2025. A dual challenge: not just for us as the fund, but also for APG as the employer and administrative organization.”

Do you feel confident about that transition, wearing your hat of fund manager?

“I have no doubt whatsoever that the people within APG will be able to manage the transition to the new system. All the knowledge and expertise needed is available. And as a fund we are small and agile enough to ensure a smooth transition. We don't mind playing the role of pioneer. On the contrary, as the staff fund of APG we want to be a showcase for the transition. We are already making all the preparations. The new Law on the Future of Pensions requires, for example, that we ask participants about their view on handling risks in their pension. We will be conducting that risk preference survey in January. The next years will be busy because, being a small fund, we don't have an executive office. We get support from APG, but there still is a lot left for us to do ourselves.”

So, you almost have a second job you don't get paid for. What is your motivation as a pension manager? You wanted to become a physician once?

“Yes, I studied medical nursing care for a year, but that wasn't my thing after all. It was my childhood dream to become a physician, just like my four-year-old son is absolutely certain he wants to become a fire fighter. I do see some common grounds though between the medical world and the pension industry. Both industries revolve around the well-being of people and that's something I can also contribute to as a pension manager.”

With a sizeable dose of stubbornness, as you characterized yourself once. Is that hindering or helpful?

“Both. I am not easy to convince. But if I act too stubborn, there are plenty of people in the management board who can push me back into my place. My managerial position has also provided me with more appreciation for other arguments and insights. Not everything is a battle which is something I had to learn. My conviction has disadvantages, but also advantages. I truly stand for my opinion. People always know exactly what my opinion on certain matters is. If you don't take a stand, it will get you nowhere. Results are especially achieved when there's a certain level of friction during the discussion in order to obtain an as high as possible pension at the lowest possible cost. That is what I am looking to achieve for our participants. In addition, I also have a personal mission: being an accessible management board, really taking the time for our colleagues, regardless of whether good or bad news has to be conveyed about their pension. We are moving in the right direction, but there is always room for improvement.”