One of Europe's largest pension providers, APG, which is responsible for more than €277m in managed assets, first revealed its interest in the UK savings market last November. Six months later, Pension Funds Insider recently caught up with Stephan Schuller, associate director for institutional clients, to find out if the Dutch firm is ready to reveal its plans for UK savers

It has been six months since the Dutch pension giant first announced publicly that it was 'possibly interested' in entering the UK pensions provider market. Today, they are one step further and with the upcoming changes to the UK pension landscape, are looking to enter the market as another rival to NEST, in a similar vein to Danish firm ATP.

Stephan Schuller, associate director for institutional clients at APG, says that the company has it eyes firmly "aimed at Britain" but that it still needs to work out much of the detail of the proposition it wishes to offer savers.

APG currently handles mandates from many of the big pension schemes in the Netherlands. It runs collective pension schemes for workers in the education, government, construction cleaning sectors, among others. Legally, the provider is free to operate in the UK, but its biggest challenge will not be with bureaucracy, but with dealing with a completely different demographic, and perception of pensions.

"You need a good offering to enter and this depends on how the market will develop itself and what we can provide in added value. We are convinced that we can offer the UK pensioner a better pension if we had total freedom," says Schuller. "We have the advantage of size, would have lower costs and offer a better deal in terms of risk apportionment."

Same, but different

The Netherlands has a different structure from the UK when it comes to the pensions landscape. The market is clearer as schemes and providers do their best to have the same rules apply to everyone. Schuller says that the big puzzle in the UK is dealing with exactly the opposite.

"We need to figure out an effective way to deal with the past. Schemes close for new members but still exist and rules that no longer apply to new entrants still apply to old ones. How do you work while you protect the rights that are still existent?" he asks.

Another 'culture shock' for APG might be the differences in risk apportionment. Although more and more responsibility, in terms of risk, lies with the members in the Netherlands, it is not set up like many defined contribution (DC) schemes here in Britain where all the risk goes to the employees. The burden is still shared in Holland.

"The question is do you have the possibility to put that offering (risk-sharing schemes) in the market in the UK and I find this a very hard question to answer at the moment," admits Schüller. "In terms of risk you do not have a lot of freedom in the UK; it is either defined benefit (DB) or DC. DB is too high maintenance, too difficult to regulate. DC on the other hand will be hard for us. It isn't our style."

Schuller says that a structure of offering individuals the possibility to make their own investment decisions in combination with standard offerings, such as NEST is intent on supplying, would be a lot easier to manage and more in tune with how APG operates.

"We would go for the scale and the cheapest solution, for the collective investments. We would offer one investment strategy for participants, just like NEST. In fact we would take away from their market share."

The UK Government's NEST scheme is broadly in line with what Schüller has in mind, but there is already one difference the associate director feels the need stress. "NEST has a cap on how much you can save, that is a real shame. They bring a good initiative to the market but just do not take it far enough."

Competition

NEST, however, will not be the only one competing with APG when they decide to enter. The Danish pension provider ATP is also out to get a stake of the UK pension market. ATP manages the Danish state pension and recently hired former MP Nigel Waterson to promote the scheme in the UK.

"ATP is a provider which is closely linked to us," says Schüller. "Not only in terms of how it has developed over the years, but also how it operates. I think if we were to offer a product - I cannot speak for ATP - but if you make a loose guess, we will be going in the same direction."

Current indications are that ATP's offering will indeed be a collective defined-contribution scheme, very similar in design to NEST.

But Schuller welcomes the competition, even if ATP already has around 5 million members in Denmark on its books.

"In a way it is competition but they can also do us a favour," says Schuller. "They help us because if you look at what we would be offering to the market it is totally different to that which the UK is used to. If you are entering a market it is a benefit; the signal is given that there are other options and that people are not dependent on NEST alone as the one providing that offer. Plus the market is big enough for more than one player."

When asked if APG will be focussing on specific sectors more than others, Schuller says that being Dutch, APG is accustomed to a model in which social partners play a big role.

"We are used to working with government, unions and employer groups, so it would be wise if we entered sectors in the UK that see these groups firmly organised. (Being a provider) to the public sector would make sense for us but of course there are more options for us to explore."

Having identified the threats and opportunities in the UK, APG seems ready to enter the race to grab as many 'auto-enrollers' as possible.

First published 21.04.11

azeevalkink@wilmington.co.uk