BeFrank: higher pension accrual thanks to low costs
BinckBank and Delta Lloyd are launching a joint venture for group defined contribution pension schemes (‘second pillar’). BinckBank and Delta Lloyd are launching a joint venture for group defined contribution pension schemes (second pillar). Named BeFrank, this new initiative will operate as a premium pension institution, a new type of pension administrator that enters the Dutch market, alongside insurers and pension funds. BeFrank is set to break open the pensions market in its role as a new pension administrator offering low-cost but excellent services that enable employees to keep complete online track of their pension accrual, costs and the accrued capital on retirement date.
Premium Pension Institution (PPI)
A PPI is a new type of pension administrator that administers pension schemes and accrues pension capital, but is not allowed to bear the insurance risks itself. The risks are covered through an insurer. The incorporation of PPIs is now possible because the Lower House of Dutch Parliament adopted the Act on Premium Pension Institutions (Wet introductie premiepensioeninstellingen) on 1 July 2010. The PPI focuses on the administration of group defined contribution pension schemes (second pillar) as a supplement to the AOW state pension. The administration of such pension schemes was formerly the preserve of insurers and pension funds. Under a defined contribution pension scheme, contributions are invested until the retirement date. As a result, the pension capital available on the retirement date remains uncertain. The member runs an investment risk. On the retirement date the accrued capital must be used to purchase a retirement pension.
BeFrank offers employers an opportunity to accrue defined contribution pensions for their employees at low costs. This results in a relatively higher pension capital. This customer-focused solution gives employees 24/7 online access to their pension accrual and the pension that can be purchased on retirement. In this way, BeFrank makes pensions and the accrual process recognisable and understandable. On average the costs at BeFrank will be approximately € 120 per member per year. This is half the costs that comparable group pension scheme administrators charge (source: PricewaterhouseCoopers).
BeFrank will actively enter the market after the Act on Premium Pension Institutions has been come into force. This is expected to be on 1 January 2011. The start-up losses for the first three years will total € 6 million. BeFrank expects to contribute to the parent companies’ profits from 2014.
Niek Hoek, CEO of Delta Lloyd Group
“Delta Lloyd, as a pension specialist, and BinckBank, as an online bank for investors, are the first to enter this new market for pension administrators. In combining our experience, expertise and state-of-the-art online technology, we offer a solution that is extremely attractive for employers and employees with defined contribution schemes. In brief, a great new pension product is launched.”
Koen Beentjes, CEO of BinckBank
“We are convinced that this partnership, which incorporates our concept for offering excellent online services at competitive prices, will lead to employees building up more pension capital thanks to lower costs and perceiving pensions as an understandable online financial product.”
Defined contribution pension schemes constitute a growth market
The market for defined contribution pension schemes is growing rapidly; in 2008 the market volume was € 6.5 billion (source: Dutch Association of Insurers, 2008). Many employers are looking for ways to curb their rising pension costs. This implies a huge market potential for a new product that is reliable and cost-effective and can be administered efficiently. BeFrank targets major employers (more than 500 staff). BeFrank is a new Dutch pension administrator, based on European legislation, and is therefore also suitable for foreign expansion.
Conference call for journalists: 6 July at 9.30 a.m.
A conference call to provide journalists with further information will be held on at 9.30 a.m. on 6 July 2010. The dial-in number is +31 (0)10 – 2944 224.
Delta Lloyd and BinckBank both have a 50% interest in the BeFrank joint venture. Folkert Pama, who is currently still active at Delta Lloyd, is the designate CEO of BeFrank. The Supervisory Board will consist of two members on behalf of Delta Lloyd and two members on behalf of BinckBank.
The alliance between BinckBank and Delta Lloyd and the start-up of BeFrank are subject to the issuance of the required licenses and regulatory approval and/or assessment.
About Delta Lloyd Group
Delta Lloyd Group is a financial services provider offering life insurance, general insurance, fund management and banking products and services. Delta Lloyd Group’s target markets are the Netherlands and Belgium. In the Netherlands it mainly operates under the brand names of Delta Lloyd, OHRA and ABN AMRO Insurance, in Belgium under the Delta Lloyd brand. Delta Lloyd Group employs 6,300 people and is listed on NYSE Euronext Amsterdam.
About BinckBank N.V.
BinckBank is the largest independent Dutch online bank for investors and ranks in the European top 5. It offers its customers fast and low-cost access to all major financial markets worldwide, online asset management services, online savings accounts and extremely wide-ranging market information. Alongside retail investors, BinckBank serves asset managers, banks, insurers and now also pension institutions. Via its online product (BPO), BinckBank takes care of the complete securities transaction and related banking administration process of these parties.
BinckBank is an independent online bank that is listed on Euronext Amsterdam. At the end of 2009, BinckBank had branches in the Netherlands, Belgium, France and Spain and a workforce of 600 employees. The activities of BinckBank are carried out by two business units: Retail and Professional Services. BinckBank was set up in 2000 and currently has more than 390,000 account holders.