Building up supplementary pensions in a multi-employer pension fund: what makes it a good choice?

Fifteen years ago, our country had 224 pension funds. By 2022, there were only 159. Despite the steady decline in the number of pension funds, there has been considerable growth in the reserves within pension funds every year. On 1 January 2018, these pension reserves amounted to 14.4 billion euros. By 1 January 2024, they came to 21 billion euros.

The causes of this decline can be found in proliferating regulations, more demanding expectations and tighter control by the regulator (FSMA):

• The management of a pension fund increasingly requires knowledge of the legal framework for supplementary pensions, the establishment of a sound governance structure, the development of a risk management framework and an understanding of financial and prudential management. It is also placing greater demands on the time of personnel members at the company in question who hold positions on the board of directors or other operating bodies of the pension fund.

• For companies, it is becoming time-consuming, quite complex and expensive to run their own pension fund. After all, managing supplementary pension plans is not a core activity. Very few pension funds have their own personnel for this: instead, they outsource both the operational functioning (including pension administration) and the mandatory oversight duties (particularly internal audit, compliance and the actuarial and risk management functions). Needless to say, this places a cost burden on the company.

We believe that it is going too far to say that all pension funds will eventually disappear. Large pension funds continue to enjoy economies of scale and prefer to hold on to their investment freedom and to the fund’s distinctive identity. However, the DORA Regulation, which came into force on 17 January 2025, has prompted renewed reflection on the part of several companies with smaller pension funds of their own. These companies have been asking themselves whether it is still feasible and affordable to maintain their own pension fund.

For companies considering closing their own pension fund, the question naturally arises:  ‘What other options are there?’. Depending on the situation and the company’s preferences, the following alternatives exist:

1. For companies with multiple pension funds of their own, consolidation is the first possibility to consider. This will reduce the number of pension funds and bring the various pension plans into a single in-house pension fund.
2. Another option is to transfer the supplementary pension plan to an insurer before dissolving and liquidating the pension fund. In this scenario, an insurance product with a specific investment policy will be chosen.
3. The final alternative is to switch to a multi-employer pension fund. This last solution seems to have become more popular in recent years and we will explain it in more detail in what follows.

A multi-employer pension fund is one that is set up on the initiative of service providers who are familiar with the world of pension funds. These service providers are specialists in pension administration, actuarial services, accounting, reporting services or banking services and have extended their activities to include a multi-employer pension fund.

The multi-employer pension fund manages the pension plans of different companies that do not belong to the same group. These companies prefer the pension fund approach, without being responsible for running the fund themselves, yet still enjoying the benefits that a pension fund offers: 

• For example, when a multi-employer pension fund is joined, the company’s supplementary pension plan is usually placed in a separate entity. In other words, the management of pension liabilities and assets is kept apart, with separate accounting and separate annual financial statements and annual report in addition to the overarching reports at pension fund level.

• Within the operation of this separate entity, sufficient involvement and input on the part of the company can be maintained through the formation of a separate operating body and, if desired, decision-making powers can be kept over the investment policy, choice of asset managers and financing policy of the supplementary pension plan. The legislation makes provision for the necessary involvement in the pension fund’s decision-making process by stipulating a minimum voting right for the companies that have joined.

• Not unimportantly: the entire return is allocated to the pension reserves. Pension funds are long-term investors. An analysis by the professional federation Pensioplus shows an average nominal annual return of 6.2%, measured over a period of 40 years. Adjusted for inflation, this means an average real annual return of 3.9%, which is significantly higher than the statutory guaranteed minimum return[1] that employers are required to provide on their employees’ supplementary pension plans.

[1] The statutory guaranteed minimum return has been 2.50% since 2025.

Vanbreda Risk & Benefits also has a multi-employer pension fund: Vanbreda PensionFund & Beyond. We thus offer an alternative for all existing pension funds that wish to cease operations. The fund is also open to any other employers who prefer a pension fund solution to an insurance solution.

Do you have any questions about this multi-employer pension fund? If so, contact your regular Account Manager Employee Benefits or Pension Consultant immediately.