by Michel Klompmaker
According to the chairman of the SOBI Foundation, Pieter Lakeman, De Nederlandsche Bank (DNB) is forcing pension funds to use incorrect actuarial interest rates. For their annual reports for 2021, the pension funds were obliged to use an actuarial interest rate of approximately 0.57%. If 4% had been used as the actuarial interest rate, which was done until 2007, the pension provisions would have been approximately 60% smaller at the end of 2021. It is clear that this is not a matter of several thousand euros. For example, the pension provision of PMT, the third largest pension fund, was over 95 billion euros on 31 December 2021. At an actuarial interest rate of 4%, this would be more than 55 billion euros less. In fact, this means that the equity capital is then understated by more than EUR 55 billion in the balance sheet. At an actuarial interest rate of 5%, the provision would even be approximately 70% smaller and PMT’s equity would amount to 65 billion euros. For the largest pension fund, the ABP, the equity is shown in the balance sheet as 54 billion euros via the actuarial interest rate prescribed by DNB, while in reality, with a somewhat more normal actuarial interest rate of 4%, it amounts to more than 370 billion.
Pieter Lakeman is well known in the Netherlands, but less so abroad, hence a brief introduction to who he actually is. Pieter Lakeman is the chairman of the Dutch Business Information Research Foundation (SOBI) and is known, among other things, for the bankruptcy of Dirk Scheringa’s Dutch DSB Bank. Lakeman denounced the sales tricks of this bank. Lakeman has also successfully initiated legal proceedings against the former CEO of ING Bank, Mr Ralph Hamers, who has left for Switzerland.
Lakeman opposed the fact that ING shareholders had in fact had to pay the hefty fine of more than 770 million euros as a result of the bank’s failing systems against money laundering and terrorist financing. Lakeman believes that, as CEO, Hamers should have been aware of these flaws in his own organisation. In addition, he does not hesitate, where he deems it necessary, to take large organisations to court, including audit firms, in cases that he believes have contributed to the preparation of incorrect annual accounts.
We asked Pieter Lakeman for an explanation of his findings and the next steps.
Lakeman: “Look in the case of the PMT pension fund, with an actuarial interest rate of 4%, the pension provision would amount to more than EUR 30 billion, but the provision is more than three times higher in the balance sheet. As a result, PMT’s equity capital is 65 billion euros too low in the balance sheet. Similar proportions apply to all major pension funds, including PME and Construction (numbers 4 and 5 in size) and the largest, ABP. All in all, Klaas Knot used the DNB as an instrument to make the reserves of the Dutch pension funds disappear by the end of 2021 by 1,100 to 1,400 billion euros through the interest rate structure. As a result, pensioners receive virtually no indexation, premium payers pay 25-30% too high premiums and the Dutch business community has been paying more than EUR 10 billion in premiums too much to pension funds for years. And do you realise what that interest term structure is based on? The basis is formed by the interest on 6-month loans. Mr. Knot considers this interest to be the norm, while he knows that interest on long-term loans is considerably higher than interest on short-term loans. In addition, Mr Knot knows that the six-month rate should not be called a market rate because it is essentially determined by the ECB board.”
What steps has SOBI taken in the meantime?
Lakeman: “In order to keep this money out of the hands of the Dutch or other governments, we have asked the Enterprise Chamber of the Amsterdam Court to destroy the 2021 annual accounts of PMT, PME and Bouw and have them drawn up again. What we are actually asking for is a prohibition on applying DNB’s interest rate term structure. The reason is clear, I am convinced that DNB is making many unnecessary victims with its foolish interest rate term structure. These are not only pensioners who miss their indexation, but also premium payers who pay more than 25% too high premiums. The 10 billion that the Dutch business community annually pays too much to the pension funds could literally have been paid in wages and salaries for the same money.”
But how is it possible that in fact no one can or may not correct DNB on this policy point?
Lakeman: “That was caused by the, let me say ‘unfortunate’ way in which the Netherlands has incorporated European pension guidelines into its legislation. The body that could intervene is Rutte 4 by ordering its officials to draft a legislative amendment in the direction it has to give. In practice we see that the Dutch legislator has outsourced the way in which the actuarial interest must be determined to a dubious regulator. The Netherlands is the only country in which pension funds are supervised by a bank. The supervisor also checks whether its own binding advice is being followed correctly. If a board member of a pension fund does not do what DNB “advises” there is a very good chance that the DNB will express its opinion that the board member is not suitable for his task and must therefore be replaced.”
Any idea how this will end up?
Lakeman: “That depends on the opinion that the Enterprise Chamber of the Amsterdam Court of Appeal will give about the annual accounts of PME. The Enterprise Chamber proposed to start with one of the three cases brought forward by SOBI and asked which case we wanted to start with. We have opted for PME and expect a judgment from the Enterprise Chamber around the turn of the year. We expect to win the case. That means a revolution in the pension country because these morbid and pernicious accounting tricks will then be buried for all pension funds, everyone will receive indexation, pension contributions will fall by more than 10 billion euros per year and the room for wage increases will increase by the same amount.”
Photo: Pieter Lakeman during the last Risk & Compliance Annual Congress on June 16, with the theme “The role of the gatekeeper in 2022, public versus private sector”
