Dick Kamp: The Wtp requires a more differentiated and transparent approach to risk management

April 28, 2026

_{This column was originally written in Dutch. This is an English translation.}

By Dick Kamp, Director of Pensions, Investment and Risk, Milliman Pensions

The introduction of the Wtp compels pension funds to fundamentally reassess their risk management framework. In a two-part series, I examine the impact of the Wtp on risk management and governance. In this first part, I outline the contextual shift brought about by the Wtp, the key elements of the risk management framework, and the impact of the new legislation on that framework. I conclude with a discussion of the Own Risk Assessment (ERB) as a central instrument in this new context.

A contextual shift in the pension system

The transition to the Future Pensions Act (Wtp) heralds a fundamental change in the Dutch pension landscape. Whereas previously there was collective risk-sharing, comprehensive solidarity, nominal pension entitlements without a firm commitment to indexation, and broad discretionary powers for boards, the system is now shifting towards: This contextual shift calls for a recalibration of the risk management framework, with implementation, monitoring, innovation and communication taking on an increasingly central role.

• targeted risk-sharing and more strictly defined solidarity, particularly within age cohorts and through specific reserves;
• personal pension capital, whereby each participant builds up their own capital;
• dependence on investment results, particularly during the accrual phase and the payout phase;
• Fixed contracts, in which the scope for policy adjustments by the board has virtually disappeared and the contract determines the rules and distribution mechanisms ex ante.

The main features of the risk management framework

The risk management framework comprises the following key components:

• Risk attitude and risk appetite: the fund’s general view on risk-taking and the level of risk the fund is prepared to accept in pursuing its objectives, aligned with the interests and risk profile of the participants.
• Risk identification: financial, actuarial, operational, governance and reputational risks.
• Risk analysis and assessment: qualitative and quantitative, including scenario analyses and stress tests.
• Risk management: policies and procedures, lifecycle investment policy aimed at keeping pace with wage and price inflation, outsourcing policy.
• Monitoring and reporting: continuous monitoring of the risk profile and control measures, reporting to the board, regulators and members.
• Evaluation: regular evaluation of the effectiveness of risk management and the implementation of improvement measures.
• Governance and culture: clear division of roles, transparency, integrity and focus on behaviour and culture.

The impact of the Wtp on the risk management framework

The Future Pensions Act (Wtp) brings about far-reaching changes to the strategic dynamics and risk position of pension funds. Whereas the board previously determined its risk appetite and risk tolerance within a collective framework, the Wtp requires a more differentiated and transparent approach. Results are made transparent at cohort level, making the fund’s outcomes directly comparable with those of other pension funds. This increases reputational risk and heightens the pressure to perform.

Complexity and implementation costs are rising, making it more difficult for boards to explain the added value of their own fund to members and stakeholders. At the same time, rapid innovation and digitalisation demand a flexible and agile operation and a robust IT infrastructure. New competencies are required within the board, particularly in the areas of IT, data, process management and communication.

In the investment sphere, lifecycle investing is becoming the norm. This requires precise tailoring of the investment mix per age cohort, aimed at achieving a pension outcome that tracks wage and price inflation over the participant’s lifetime. A robust monitoring process is indispensable in this regard.

The greater transparency and comparability of results mean that participants are becoming more critical and assertive. This requires careful, proactive and clear communication that responds to participants’ expectations and questions.

Dependence on the administering organisation increases significantly under the Wtp. The correct allocation of returns, the reliability of communication and the proper functioning of lifecycle investments are crucial and are directly linked to the quality of administration. This places high demands on cooperation and data exchange between the pension administrator, asset manager and custodian. Strict data quality requirements and transparency (such as the ‘receipt’) increase the pressure on the chain. As the policy scope for funds to make their own adjustments is limited, a robust outsourcing policy, strict SLA agreements and intensive monitoring are essential. Concentration risks must also be taken into account when large administrators serve multiple funds.

In more practical terms, the impact of the Wtp is reflected in the risk management framework as follows: The Wtp thus calls for a risk management framework that focuses less on policy discretion and more on the quality, reliability and flexibility of execution and communication.

• The shift from collective to individual requires the framework to facilitate and monitor individual risk profiles and choices.
• Risk sharing becomes more complex, with different reserves and allocation mechanisms, each requiring specific control measures.
• Less policy discretion means a greater emphasis on monitoring, reporting and evaluation within pre-determined contractual frameworks.
• Transparency and clear communication become essential for managing expectations and maintaining trust.
• Operational risk management and innovation capacity become crucial success factors, given the required process optimisation.
• Finally, the focus in governance and culture shifts towards the quality of execution, the behaviour and the learning capacity of the organisation.

The Own Risk Assessment (ORA) in the new context

The ORA is a central instrument within the risk management framework and serves as the comprehensive, forward-looking assessment of all material risks to which the pension fund is exposed. The ERB links the various components of the framework: Within the foreseeable future following the transition to the new pension contract, it must be determined whether a new ERB needs to be drawn up. It is advisable for the board first to take the opportunity to complete the actual transition process and stabilise the new administrative and operational processes. It is also advisable to gain initial practical experience with the functioning of the new contract, the lifecycle investments, the solidarity mechanisms and the reporting. This will allow the board to become accustomed to the new context and gain a realistic picture of the actual risks and challenges in practice. DNB has not published an explicit timeframe for this. A timeframe of 6 to 12 months following the completion of the transition process seems reasonable and proportionate, given the time required to stabilise the new processes and gain initial practical experience.

• Risk identification and analysis: the ERB integrates all identified risks (financial, operational, strategic) into a single comprehensive overview.
• Risk management: the ERB assesses whether the control measures are adequate and whether the risk profile is consistent with the risk appetite.

• Implementation and IT: the ERB assesses whether the implementation of the pension contract, including the functioning of IT systems, data integrity and process automation, is sufficiently robust and reliable to manage the risks and achieve the desired pension outcomes.

• Monitoring and evaluation: the ERB provides the framework against which the effectiveness of risk management is periodically assessed.

• Governance: the ERB is a governance tool that structures the dialogue on risks and supports decision-making.

A potential central problem statement within the ERB can be constructed from the following interrelated sub-questions: Together, these sub-questions form the integrated problem statement of the ERB and structure the governance dialogue on risks in the new context.

• Risk management: to what extent is the pension fund, following the transition, able to identify, assess and manage the relevant risks in a timely manner within the framework of the new pension contract?
• Balance: is a balanced distribution of risk across all participant groups and age cohorts ensured, in line with the contractually agreed allocation mechanisms?
• Continuity: is the long-term continuity of the fund guaranteed, taking into account the specific characteristics of the new contract and the changed external environment?

Interim conclusion

The need for a new ERB following the transfer is driven by the reasons already mentioned above, such as the fundamentally changed risk context, the substantially altered risk profile and the new investment, operational and IT risks.

To be continued

In the second part of this two-part series, the new emphasis placed by the Wtp on risk management will be elaborated in practice. This will address the shift in the board’s role — from active policy-maker to system manager — and its consequences for governance, competencies and decision-making structures.

The two-part series concludes with a concrete overview of practical next steps with which funds can future-proof their risk management framework. Part 2 will be published next month.

This is the fiftieth column in a series on risk management. The series aims to encourage readers to view risk management as an integral part of running a pension fund.

More columns by Dick Kamp