nout wellink : challenges and opportunities for corporate pension fund management speech by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at hoofdkantoor shell, den haag, 26 june 2007. * * * the organizers have asked me to contribute to this seminar in honour of peter bronkhorst, who is stepping down as managing director of the shell asset management corporation. in view of peter ’ s outstanding contributions to the dutch pension business in general, and to that of shell in particular, i decided to agree to this request. an additional reason, of course, is that this is an excellent opportunity to address a prominent group of asset managers. although it is tempting to resort to breezy lightheartedness on a festive occasion such as today, i have opted for substance, as peter bronkhorst is widely known as a man of content and professionalism. given today ’ s theme – challenges and opportunities for corporate pension fund management – i would like to discuss some challenges that pension funds have recently encountered. more specifically, i would like to explore how company pension funds have dealt with these challenges in the netherlands and in the us. in this respect, it is interesting to compare the dutch corporate pension industry with its american equivalent, as they have chosen different routes to cope with the increasing burden of aging : whereas the americans have individualized their pension system to a large extent, collectivity was preserved in the netherlands. in evaluating these different routes, i will emphasize four key messages. first, i will argue that a clear separation between a sponsor and its pension fund is a desirable feature of any pension system. second, i will point at the added value of collective pension plans over individual ones. third, i will argue that this collective nature saddles pension fund asset managers with an important social mandate. and fourth, i will also point at an opportunity in the pension delivery market, which i challenge you to seize. comparison of the dutch and american pension system since most of us are more familiar with the dutch pension system, i will start with a brief overview of the american system. the us pension system is characterized by a relatively small governmentimposed pay - as - you - go system. this benefit constitutes only 45 percent of total retirement income in the us. here, the netherlands and the us are comparable. indeed, the dutch state pension scheme is also fairly small, as it provides the average employee with about 50 percent of

wake of the 2001 financial market storm. during this period, peter kept a constructive, open attitude that contributed to agreement on the necessary adjustment measures. with the recovery of the dutch pension system now well - established, this all seems like long ago, but we wouldn ’ t be sitting so comfortably now if it hadn ’ t been for the necessary measures taken and for peter ’ s contribution to implement them. conclusion i am coming to the end of my speech. i have stressed four important interconnected messages, relevant for the future world of pension finance. first of all, i believe that we should preserve and promote a clear separation between a sponsor and its pension fund. second, i have pointed out the added value which collective pension arrangements have over individual ones by protecting pension plan participants against their own shortcomings, by exploiting economies of scale, and by enabling intergenerational risk - sharing. third, i have emphasized that asset managers need to realise that their fiduciary mandate saddles them with important social responsibilities. last, i challenge you to come up with pension products that are tailored to individual preferences, but are also able to maintain the benefits of collectivity. i congratulate peter bronkhorst on the excellent job he has done in these respects. the flipside is that i regret his stepping down from a prominent position in the pension industry. as a real – and therefore internationally oriented – dutchman, peter was often able to build bridges, even in intense debates. now time has come for you, peter, to harvest, as a pensioner, the fruits of the seeds you have sown. i wish you all the best in the future.