Together with the guidelines established under the Sarbanes-Oxley Act, the CAPSA pension guidelines offer a framework for effective internal control and financial reporting. Key elements of pension governance for companies include: organisationally independent controlling; appropriate risk management; timely and well-prepared information; defined processes and directives that enable management to fulfil their responsibilities; and last but not least, a review process evaluating the performance of the governance system itself.
Pension governance is taking off in the Netherlands
As a response to the “Pension Plan Governance Guidelines” in the USA, the Stichting van de Arbeid 1 in the Netherlands established its “Principes voor goed Pensioenfondsbestuur” 2 in December 2005. The necessity for solvency and transparency is also reflected in the development of a new “Financieel Toetsingskader” 3 (FTK) in the Netherlands, and in the requirements of the International Financial Reporting Standards (IFRS) in general.
Why pension governance is a must-have
As new legal and financial guidelines are established by national governments all over the world, companies need not only to follow the trend, but also to set a benchmark in the market. By setting standards in terms of integrity and transparency that exceed the legal requirements, a high level of trust will emerge sharpening corporate competitiveness in the market. After all, trust is the binding component for a long-term relationship with all stakeholders of a company.
Zwitserleven leads the way in pension governance
Zwitserleven was the first life insurer in the Netherlands to achieve SAS70 type I certification, which is obligatory for US-listed companies that outsource services to a third-party provider. The SAS70 certificate fulfils the US audit standard for service providers regarding high quality standards for pension administration. It is an internal control statement from the service provider, approved by an external auditor for clients and clients’ auditors. Zwitserleven expects the SAS70 certificate to become a standard for European companies as audit standards evolve throughout the continent.
IFRS pension plan
In order to support companies applying the International Financial Reporting Standards with respect to article 19 of the International Accounting Standards (IAS), Zwitserleven has established an IFRS pension plan. This is designed for companies that wish to report according to the rules of a defined contribution scheme without losing the advantages of a salary-related pension scheme realised through an indexed average pay pension plan.
Further certification for Zwitserleven in 2007
2007 started well for Zwitserleven. It received SAS70 type II certification in February (backdated to December 31, 2006). This is an extended SAS70 version, meaning that not only the control environment is in place, but that it has been tested in depth by an external auditor. Swiss Life Asset Management is also working to ensure it has a SAS70 certificate, in order to guarantee its clients high quality standards in managing their assets.
Financial indexation of pension funds in 2007
As of January 1, 2007, the solvability and risk coverage of pension funds will be calculated according to Financieel Toetsingskader (FTK). FTK replaces the Actuariele Principes Pensioenfondsen4 (APP) and has become more strict as well as complicated. Zwitserleven will be able to assist its clients partially with the calculation of the extended information required under the new law (provided the relevant data is available to Zwitserleven). This includes, for example, the new calculation method for the technical reserve.
Zwitserleven is ahead of the game
With the successful testing of its internal organisation under SAS70 type II, the offering of its IFRS pension scheme, as well as its support for clients under the new reporting requirements of the Nederlandsche Bank, Zwitserleven has made a major and proactive contribution towards the establishment of effective pension governance in the Netherlands.
Pension governance event in March, 2007
Zwitserleven will organise a pension governance event on the 20th of March. A panel of well-known personalities will give their views on recent developments in pension governance, and highly skilled professionals will present information in detail on the SAS70 certificate and Zwitserleven’s IFRS product. Please contact us for an invitation and hold the date. We look forward to meeting you.
1 Labour foundation
2 Principles for good pension fund management
3 Financial indexation of pension funds
4 Actuarial principles for pension funds