BRUSSELS -- One of Belgium's first industrywide pension schemes will start looking for money managers later this month for its startup assets of E20 million ($20.6 million).
The Fondsecurite d'Existence des Ouvriers du Sectuer des Fabrications Metalliques is one of Belgium's first sectorwide benefit administrators to set up a pension plan for blue-collar employees.
The Belgian government has backed the move to establish second-pillar pensions but at this stage there is no legal framework for sectorwide plans, said Paul Soete, director general of Fabrimetal, the metal industry employers' association. At this stage, only one in 10 blue-collar workers is covered by a pension scheme in addition to the basic state provision.
The Fondsecurite d'Existence des Ouvriers de la Construction, the employment-benefit administrator for the construction industry, is believed to have established a similar pension plan earlier this year. Sources said it hired Robeco Institutional Asset Management, Rotterdam, to run a balanced mandate, but fund officials and Robeco officials refused to comment.
There is some dispute in the Belgian market as to whether these sector-based saving schemes are pension plans or not, said Yves Stevens, a Ph.D. candidate in pension law at the University of Leuven, Belgium.
Under current law, only a pension scheme set up by a corporation or an insurance company is recognized as a legal pension plan.
The Parliament has set up a cross-party grouping to draw up recommendations on how these schemes should be run and regulated. Legislation is expected later this year.
There are discussions now among consultants, benefit administrators and money managers as to whether the pension assets should be held outside the administrators. "It's possibly not so sound that these assets are included with the funds in these organizations, as there could be a mixup between the assets and the liabilities," said Karel Stroobants, chairman of the Belgian Association of Pension Funds.
The sector benefit administrators are jointly trusteed benefit organizations that pay out disability insurance and other workplace benefits to members of the sector. They collect contributions from employers and pay out the benefits.
At this stage, the metalworkers' scheme is working within the spirit of existing law that regulates established second-pillar funds run by corporate pension plans and insurers, said Mr. Soete.
The metal workers' scheme was first suggested in a collective labor agreement drawn up last March between Fabrimetal and labor unions. The plan will provide a pension for 150,000 blue-collar workers and is intended as a way of encouraging workers to stay in
the industry. It also was intended to provide a pension for employees of small companies that otherwise could not afford to sponsor a pension program.
The defined contribution scheme will be funded with a yearly income of E20 million, which represents 1% of salaries of its members. "This is not much but it is a startup . . . within five to 10 years there will be a significant amount for retirees," added Mr. Soete.
Belgian consultants Pragma Consulting and Conac, both of Brussels, are drawing up an asset allocation proposal, which will be presented to Fabrimetal and worker representatives later this month. "Then we will start with the interrogation of the different managers," he said. Managers are likely to be appointed by the beginning of July.
The assets will be held at the metal industry benefit administrator until the legislation for sectorwide plans is set. "We plan to make it a separate pension plan, but at the moment it is not legally possible," said Mr. Soete.
Union sources said the legal regulation of sector-based pension plans is a major political issue in Belgium. One source close to the discussions in the pensions industry said insurance groups were unhappy that they had not been included in initial discussions with employers about developing sector-based plans.
Under the current arrangements, where the benefit administrator holds the assets, the metal workers scheme pays a lower rate of tax than would be the case if it were a fully fledged corporate plan. It is a possible the new law would equalize the taxation of these schemes.
But Mr. Soete argued that a lower tax rate would be fairer for the sector schemes, as they have a different cost base compared with corporate plans. "We have dying and stopping companies in the federation. We will still have to supply the workers' rights so there are some costs to this solidarity," he said.
The sector-based funds also are believed to be uncomfortable with the mobility and vesting rules in existing laws, said Kristof Woutters, a consultant at Pragma Consulting.
