An interview with Eline Lundgren, board member of the CDC pension funds of ING and NN Group. The board acts in the interests of the employees, former employees and pensioners. Eline sits on the board as a representative of FNV, the largest trade union in the Netherlands.

As a trade union board member, how did you get involved in our CDC pension funds?
Pension plans are developed by the social partners: the employers and the trade unions. It took years of preparation to set up the CDC pension funds. I was involved in negotiations for collective labour agreements as a representative of the FNV. Given my experience in pension, I was asked to join the technical committee. The social partners had reserved a seat on the board for the FNV, and I was nominated for that position. On 1 January 2014, we were commissioned by the social partners to administer the pension plan on behalf of ING and NN Group. This was a challenge I was eager to take up. Of course, there would be obstacles along the way. That’s life. But who, in this day and age, gets the opportunity to set up a whole new pension fund from scratch and then run it?

Meanwhile, it's been four years since the pension funds started. Mission accomplished?
Within a short span of time, we managed to set up a complete pension administration organisation. We made our mark in the playing field alongside the employers, social partners and Pensioenfonds ING. The road was sometimes bumpy. As board members, we had to get to know each other and become a good team. Meanwhile, we were under a lot pressure time-wise. I enjoyed those days. The team as a whole became more than the sum of its parts. That was because our characters were compatible, we shared the same ambitions and focus, and we trusted one another.

“The future looks brighter now that our funding ratio is improving.”

And in financial terms?
We started with an empty portfolio and had to manage a lot of risks, but we had no buffer. Despite high contribution levels, the pension funds' funding ratios - which are a measure of their financial position - fell sharply as a result of declining interest rates. The CDC pension funds were hit harder by the declining interest rates than older pension funds were, because our pension funds’ commitments are due to be paid out at a later point in time, on average. This makes them more sensitive to interest rates. We had to work hard and reflect on our actions all the time. Were we making the right decisions, hedging the interest well enough, and would we be able to reposition if interest rates were to pick up again? The future looks brighter now that our funding ratio is improving.

What about the organisation?
We have what you call a joint governance model. This means employers and employees both have an equal number of seats on the board. The current board doesn't have a seat for pensioners, simply because there are very few of them at this point. When the number of pensioners starts to grow, they will of course be given a seat on the board. Alongside the managing board, we have a supervisory board and a supervisory committee. The supervisory board (in Dutch: verantwoordingsorgaan, or VO) monitors whether we execute policies in accordance with the agreements made, and whether we make the right decisions and weigh all interests carefully. Our VO is small, but very professional. We've built a constructive relationship with each other. Since the beginning of 2017, we've also had a supervisory committee. Before that, we were visited by an audit committee once a year. The supervisory committee monitors us on a continuous basis and gives feedback regularly; it's more like a sparring partner to us.

“Pension is a wonderful product that enables people to save for their retirement in a relatively inexpensive manner.”

How do you raise pension awareness?
Since the CDC pension funds were born, we’ve been putting a lot of effort into raising pension awareness. It sometimes bothers me that we focus mostly on risks. That makes people feel negatively about pensions, when in fact it's a wonderful product. Life is never without risk, and neither is pension. We are required by law to report on risks, and pension fund participants should be aware of that. Really, pension is a wonderful product that enables people to save for their retirement in a relatively inexpensive manner. People tend to forget that nowadays, because low interest rates have pushed the cost of pension up. But roughly two thirds of their pension benefits are funded through collective investments! Of course I value transparency, but I feel it’s even more important that people understand how pension funds work. I'd like to encourage lawmakers and regulators to enter into a dialogue with pension fund participants.

The board values diversity. How do you feel about that?
Diversity is very important as it lifts us to a higher level. Diversity is often seen in terms of age, gender, skin colour.... But that's not what it's all about. What matters more is how decisions are made. If everyone has the same opinion, you might as well govern on your own. However, if you arrive at a unanimous decision from a variety of opinions, you're achieving a lot more. The outcome is hard to predict. It's a matter of character, experience, social awareness and a sense of responsibility.

“Helping others develop themselves gives me a kick. It's the ‘Eline drive’.”

You're involved in our Pension Fund Academy. How do you feel about this initiative?
It's great! At first, I wasn't so sure we’d be able to motivate young people for this, but as it turned out, there were a lot! Who’d have thought we'd have to make a selection? We now have a club of nineteen young colleagues with different levels of knowledge when it comes to pension. At the kick-off, they were a bit reserved, but at the second session, ‘Dilemmas in the boardroom’, there was a real vibe. Together, they worked on a case from various perspectives. I coached the ‘board’. Everyone played their part and they reached consensus in less than an hour! As part of the 'pension establishment', I thought we’d have to inspire these young people, but in fact it was the other way around.... they inspired me. Helping others develop themselves gives me a kick. It's the ‘Eline drive’.

The social partners are working to create a new pension agreement by 2019. What do you feel it should cover?
It should ensure that we'll be able to maintain the pension entitlements accrued for our participants, and our ambition in that respect, going forward. I believe in collectivism. I feel it's far more effective than individualism. In my opinion, it's more transparent towards participants if they know what their pension is worth and how much they’ll get when they retire. With private savings, you know how much you’ve got now, but you don't know how much it's worth in terms of future pension benefits. Moreover, the return you can get on collective assets is larger than on individual assets. At the end of the day, you get a larger pension at less risk.

Any final words?
The pension funds' participants are looking over my shoulder. I'm comfortable with that, because it's what I’m working for. I enjoy talking with them. Participants should be able to find the board easily. They should be able to express their concerns and hold us accountable. That's an invitation!