Rethinking the approach to the WTP transition



Most Dutch pension funds and administrators are struggling with the major changes needed to execute the future WTP pension schemes. In many cases, organisations use an end of life Policy Administration System (PAS) and have had to conclude that a migration to a new Policy Administration System (PAS) is necessary. This is typically a major project involving high levels of effort, cost and risk. Media have covered numerous examples of this. The need to replatform has already caused a landslide in the landscape of systems and suppliers used.

There are however also systems that actually can deal with the new requirements. So, while the transition is a significant change, no migration is required. It can be handled within the same PAS. This allows these users to take a different approach to the WTP-change.

„A different starting position opens up alternative paths to the transition. Too often, technology is a restraint to business rather than business enabling” argue Peter Roos and Jeroen Elbertse of the European pension software provider Lumera. „Having a PAS that is Fit For Use enables a more controlled approach that will avoid risks, helps decision making and will help proving in advance that the operations will be able to execute the WTP.”European pension software provider Lumera has been helping Scandinavian pension providers transition from DB to DC schemes since 2003. This is also the challenge currently facing Dutch pension funds. By 1 January 2027, they must have switched to a more individualised premium scheme, where members essentially have their own pension pot, but where pensions are still invested collectively. The transition from DB to DC requires a complete redesign of the administration and execution system for any player involved. While the PAS is only a part of the entire “pension value chain” that needs to be revised, it is a vital part in which there is little room for errors, argue Elbertse and Roos. Elbertse: „If it turns out that something goes wrong during or following the switch to DC, for instance in the benefit phase, this will have major consequences for pensioners. Nobody wants to explain mistakes in the public media either. The extend to which you can really prove the correctness of the change and exercise in advance is highly relevant.“ With the transition, the ‚devil is in the details‘. Elbertse: „With a big change like this, the challenges are in the nitty gritty stuff. That’s where things can go badly wrong. To find that out now, you really have to test and include all the data and participants. In our view a sample is not enough. After all, each participant’s situation is unique. So to be really sure that nothing goes wrong under the new regime, you preferably need to test the whole population and start doing that as soon as possible. Even with mutations that are not that common but can have major consequences for individuals if things don’t go right.“

Start shadow-testing as soon as possible

Pension funds must be ready for the new regime by 1 January 2027. „That still seems far away, but our experience shows that you really need the transition period to be well prepared,“ Roos argues. „After all, you don’t want to run into bumps when you are in the middle of the transition, and you are under a lot of pressure. Therefore, for example, take all the mutations from the past year and run them through the new pension scheme in advance.“ If you have the data and the system able to test it, why not? In a way funds can perform a sort of shadow testing that is sometimes used during migrations. Lumera is an example of a supplier who supports their users with a variant of this method and has taken it to the next level.This way of testing also provides an opportunity to check the quality of historical dates. Is the data complete for the new pension scheme, is it correct? Roos: „Data quality can surprise negatively, many pension administrators may be stuck with decades of accumulation of small errors. This is a major risk that may become visible in the transition to a new system. In terms of risk management, it is better that this comes to light now. So don’t wait too long to start testing.“

Transition does not have to be an administrative ‚big bang‘

Elbertse „We encounter fears that the new pension system will lead to a big bang in administration. However, it does not have to be that way. Make sure you make good use of the transition period to firmly test the new rules on your system now and see what the consequences are.“ The outcomes will give pension administrators more certainty, certainty they need to make good decisions, Elbertse and Roos argue. The risks come into clear focus and testing also provides guidance on how to properly set up communication with participants, for example. Funds can experiment with the new pension scheme.Testing and eventual migration to the WTP need not coincide with the introduction of a whole new system. „We see pension providers seizing on the changes to buy a new system, but this is not always necessary. Roos: „For shadowing, we have developed the Digital Twin strategy, in which we clone the existing system, so to speak. With the clone, we can then test the WTP scheme separated from the daily operational processes, with real data, historical mutations, and all participants. In this way, you can filter out errors now, so that you are not surprised at the actual transition.“Source: Pensioen Pro, June 16. 

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