Supervision of pension funds in the Caribbean Netherlands

Information about specific subjects

This page briefly describes how the Dutch pension system works and discusses various aspects of pension fund supervision in the Caribbean Netherlands. If you cannot find the requested information or if you have any other questions, feel free to contact us (in Dutch or English). Just call us at +31 20 524 9111 on business days between 9:00 and 17:00 (Dutch time). Or drop us a line at info@dnb.nl.

Contents

• The Dutch pension system
• Supervision on pension funds in the Caribbean Netherlands
• Establishing a pension fund
• Material supervision
• Prudential supervision
• Integrity supervision
• Fit and proper assessments
• News and publications
• Register

The Dutch pension system

The Dutch pension system consists of three parts, also referred to as the three pillars:

• The first pillar is a basic income provision in the form of a General Old Age Pension (AOV). This is a basic pension for all people aged 65 and above who have lived or worked in the Caribbean Netherlands.
• The second pillar is the pension that employees build up through their employer. This provides retired (former) employees with an additional benefit on top of their state pension.
• The third pillar consists of voluntary individual income provisions (e.g. life insurance to fill a pension gap or to retire early). 

De Nederlandsche Bank supervises the pension providers in the second pillar, such as pension funds and insurers. We also supervise financial institutions that offer products in the third pillar, such as insurers and banks.

On 1 July 2023, the Future of Pensions Act (Wet toekomst pensioenen – Wtp) entered into effect. In the European Netherlands, pension funds need to transfer to a new defined contribution scheme. The Wtp has no impact on the Pensions (BES) Act and therefore does not affect pension funds in the Caribbean Netherlands.

Supervision of pension funds

Establishing a pension fund

What is a pension fund?

The Pensions (BES) Act (Pensioenwet BES – Pw BES) defines a pension fund as a legal entity in which funds for at least two members, deferred members or their surviving dependants are or have been collected and are managed for the administration of a pension scheme. The Pw BES distinguishes between two types of pension funds:

• A company pension fund: a pension fund affiliated with a company or a group company
• An industry-wide pension fund: a pension fund for one or more sectors or sub-sectors

An employer who concludes a pension agreement with its employee(s) must place the administration of this pension agreement outside its company. The Pw BES determines where the administration of the pension agreement can be placed:

• a company pension fund or industry-wide pension fund
• an insurer;
• a pension institution having its registered office in another part of the Kingdom if the Netherlands
• an insurer having its registered office outside the public bodies, provided it is authorised under the Insurance Supervision (BES) Act (Wet toezicht verzekeringsbedrijf BES) to pursue life or non-life insurance business in the Netherlands.

Notification duty
Under the Pw BES, a pension fund must make a notification to the Minister of Social Affairs and Employment and the Nederlandsche Bank (DNB) within three months of its establishment, using a notification form prescribed by the Minister.

Within the same period, the pension fund’s board must submit the following documents to the Minister and DNB:

• a copy of the deed of establishment
• a copy of the regulations certified by the board
• a copy of the agreement, certified by the board, setting out the arrangements for the payment of sums by the employer and the amount to be deducted by the employer from the members’ wages

For pension scheme members, a prudent financial structure of the fund is essential. The Pw BES and delegated regulations provide that this structure must be laid down in the actuarial and technical business report. In it, the board must explain how the pension agreement will be financed. In outline, the report must describe the structure of pension rights and their funding, the composition and valuation of the pension fund’s assets and liabilities, management, internal management, as well as the matching of assets and liabilities. It must also address the solvency requirement.

Intervention by DNB

We cannot approve or block the establishment of a pension fund, but we will check the documents to be submitted against the relevant statutory provisions. If we find that they fail to meet the applicable requirements, we will ask the board to amend them. Depending on the severity of our finding and the issue in question, the fund will then have several months to make the required amendments. If necessary, we can then issue an instruction or impose a fine.

Amendments

If a pension fund at a later stage amends the documents submitted to the Minister of Finance and DNB upon its establishment, it must report the amendments to the Minister and DNB. Pursuant to the Pw BES, if the pension fund has amended its articles of association, it must submit a copy to the Minister and DNB within three months of the implementation of the amendments. If it has amended its regulations, it must submit a copy of the amendments certified by the board. If a company pension fund has amended the pension agreement, it must submit a copy of the amendments certified by the board.

Material supervision

Introduction

We assess pension funds’ articles of association and pension regulations and insurers’ pension contracts. This is referred to as material supervision. We advise the Ministry of Social Affairs and Employment on mandatory membership of industry-wide pension funds.

The Pw BES and the delegated regulations based on this Act impose material requirements on pension funds, in particular with respect to:

• a pension fund's articles of association
• the regulations between the pension fund and its members

The articles of association and the regulations form the basis for pension benefits. It is in the interest of the correct determination of members’ rights and obligations that both are in accordance with applicable laws and regulations. This is ensured by material supervision.

Articles of Association

The Pw BES distinguishes between company pension funds and industry-wide pension funds. Pension funds are legal entities, usually in the form of a foundation, and therefore have articles of association. The Pw BES prescribes the subjects to be addressed in the articles of association:

• the pension fund’s function
• the pension fund’s management
• the types of members
• the pension fund's income
• the investment of the financial means
• the rights arising from membership and the system for funding those rights
• how board members are appointed
• the cases in which the employer has reserved the right to reduce or terminate its contribution to the pension fund
• amendments to the articles of association and regulations, in particular as regards amendments to the rights and obligations of members and former members in cases where the fund’s financial situation so warrants
• the fund’s liquidation, in particular as regards the obligations of the liquidators and the allocation of the pension fund's assets

To define its scope, an industry-wide pension fund must define the industry’s business activities. If an industry-wide pension fund offers employers the option of voluntary affiliation, it must set out the conditions for affiliation in its articles of association.

We assess whether a pension fund’s articles of association are in compliance with the Pw BES, the BES Civil Code and other relevant laws and regulations. We perform this assessment as a risk-based random check. In principle, we assess each pension fund randomly once every three years, but we assess the articles of association of the large pension funds annually.

Pursuant to the Pw BES, a pension fund must submit its articles of association to us on two occasions:

• Within three months of the establishment of the pension fund, an authentic copy of the deed of establishment must be submitted.
• Within three months of its preparation, an authentic copy of the deed containing the amendments to the articles of association must be submitted.

Pension scheme regulations

A pension fund or insurer (pension provider) must draw up pension scheme regulations on the basis of a pension agreement. The regulations describe the pension scheme. By introducing the Pw BES, the government has clarified the division of responsibilities between the various parties involved in pension legislation. Explicit emphasis is placed on the triangular relationship between employee, employer and pension provider.

The basic principle underlying this triangular relationship is that old-age pension constitutes an element of the terms and conditions of employment. Within this triangle, the following relationships exist:

• the relationship between the employer and the employee who conclude a pension agreement
• the relationship between the employer and an external pension provider to which the employer outsources the administration of the pension agreement on the basis of an administration agreement
• the employee then becomes a member of the pension scheme administered by the pension provider.

We assess whether a pension provider’s regulations are in compliance with the Pw BES and other relevant laws and regulations. These include the equal treatment laws, the Civil Servants (BES) Pensions Act (Pensioenwet ambtenaren BES) and delegated regulations based on those laws. We perform this assessment as a risk-based random check. The assessment consists of a comprehensive assessment of the pension scheme regulations. The regulations of pension schemes administered by an insurer are assessed on a random basis by means of an on-site examination.

The pension scheme regulations are drawn up by the pension provider in accordance with the pension agreement and the administration agreement or the administration regulations. As a minimum, the pension fund must include the following provisions in the pension scheme regulations:

• a description of the pension right arising from the pension agreement, i.e. the two must match exactly
• amendments to the articles of association and regulations, in particular as regards amendments to the rights and obligations of members and former members in cases where the fund’s financial situation so warrants

Under the Pw BES, there are two moments for submission of the pension scheme rules to DNB and the Ministry of Finance:

• within three months of the establishment of the pension fund, a certified copy of the pension scheme regulations must be submitted.
• within three weeks of the date of drafting, a certified copy of any amendments to the pension scheme regulations must be submitted.

Prudential supervision

Introduction

Prudential supervision aims to safeguard the soundness of financial institutions and contributes to the stability of the financial sector. A pension fund meet various statutory requirements aimed at promoting the soundness of pension funds, known as prudential requirements, when it is established and when administering pension schemes. These include:

• sound operational management
• contents of the actuarial and technical business report
• required own funds
• technical provisions
• how conditional indexation is funded

Sound operational management

A financial institution or pension fund having its registered office in the Caribbean Netherlands must organise its operational management in such a way as to ensure the sound pursuit of its business.

Each institution must therefore have a clear picture of how its operational processes are managed. This means that risks must be identified and sufficient controls must be implemented. This could include segregation of duties, frameworks and guidelines, internal control procedures, etc. Internal control is the process designed to obtain reasonable assurance concerning the achievement of the organisation’s objectives.

Sound operational management includes as a minimum:

• a clear and adequate organisational structure
• A clear and adequate division of duties, powers and responsibilities
• adequate documentation of rights and obligations
• unambiguous reporting lines
• adequate information provision and communication systems

The effectiveness of the institution's organisation and its procedures and measures must be assessed internally and independently. This is not the same for all institutions – the proportionality principle applies. Operational management must be geared to the nature, size, risks and complexity of the pension fund's activities.

Contents of the actuarial and technical business report

An actuarial and technical business report lists the core criteria underlying a pension fund's financial and other policies. Drawing up this report is a requirement pursuant to the Pw BES.

The report is intended to make a pension fund's actuarial and technical business policies transparent and, as such, it fulfils the role of a business plan explaining the overall functioning of the pension fund. It compels pension funds to take into account all interconnected aspects of operational management, funding policy and risks. For DNB, the report is a comprehensive source of information in exercising its supervision.

An actuarial and technical business report must, as a minimum, set out how the implementation of the following points is provided for:

• the contents of the administration agreement
• sound and ethical operational management
• conditional indexation
• the Financial Assessment Framework
• a statement on the investment principles and a description of the investment management instruments

Most of the provisions listed above are subject to further regulations.

Where a pension fund’s risks have been transferred or reinsured, the pension fund may suffice by referring to the provisions of the agreements.

A pension fund must operates according to the policy laid down in the report, in accordance with Section 10(1) of the Pw BES. The board must submit amendments to the report to DNB without delay, in accordance with Section 10(2) of the Pw BES.

Integrity supervision

General

In addition to solidity, integrity is a prerequisite for a sound financial system. This is why integrity risk management at pension funds is enshrined in the Pw BES. Financial integrity is a prerequisite for a sound financial system. A pension fund must set up its organisation in such a way as to ensure ethical business operations.

Section 5b of the Pw BES requires that business operations must be ethical. This standard is further elaborated in Paragraph 3 of the Pensions Act (BES) Decree (Besluit Pensioenwet BES – the Decree). The Decree states, among other things, that a pension fund must ensure a systematic analysis of integrity risks (the SIRA) and, based on this analysis, adopt an integrity policy and implement that policy. More information on the SIRA can be found here. Note: this document was prepared under Dutch law, but the SIRA to be prepared by service providers in the Caribbean Netherlands is similar to the SIRA to be prepared by Dutch institutions. This document will be reviewed in the foreseeable future.

In addition, pension funds must have procedures and measures in place regarding the prevention of conflicts of private interests with those of the pension fund. A pension fund must also have a code of conduct.
DNB oversees the measures that pension funds have taken as part of their operational management to manage integrity risks. If you have any questions about integrity supervision of pension funds in the Caribbean Netherlands, please emaile us at: tfc.bes@dnb.nl.

Sanctions

More information about sanctions compliance can be found on this page.

Fit and proper assessments

Introduction

Directors and (co-)policymakers of industry-wide pension funds and company pension funds in the Caribbean Netherlands are subjected to propriety assessment. We also assess day-to-day policymakers in terms of fitness.

Why we conduct assessments

Having trustworthy and knowledgeable directors and (co-)policymakers helps to maintain a stable and sound financial sector. This ensures that members and other stakeholders can trust pension funds. We conduct the assessment pursuant to Section 5a of the Pw BES.

DNB has a separate task with regard to an ethical financial sector in the Caribbean Netherlands. It is therefore imperative that we form our own opinion on the propriety of the (co-)policymakers of the pension funds having their registered office in the Caribbean Netherlands.

Reassessment

Under Section 4 of the Pensions Act (BES) Regulation, the propriety of a (co-)policymaker of an institution in the Caribbean Netherlands is beyond doubt for a period of three years following assessment. However, if a change in the relevant facts or circumstances gives reasonable cause for a reassessment, we will conduct a reassessment within this period.

After the three-year period, we reassess the propriety of the (co-)policymaker. We take the initiative and ask the institution to re-nominate the persons to be assessed using the Questionnaire for appointment in the Caribbean Netherlands.

More information

More information about fit and proper assessments can be found on this page.

News and publications

• Consultation of PEP Good Practices (Wwft BES)

Register

The register includes the licences granted by DNB under the Pw BES. In general, financial institutions must have a licence from DNB to operate in the Caribbean Netherlands.