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HARROGATE, England-U.K. occupational pension funds should prepare to join the European Economic and Monetary Union mechanisms, a Dutch executive says.
Although the U.K. government has not committed to joining the European Monetary Union, the changes in financial markets when the proposed single European currency-dubbed "the Euro"-is introduced in 1999 will affect U.K. pension funds, said Jos van Niekerk, chairman of the combined Dutch Project Group Euro of the Assn. of Industry-wide Pension Funds and the Company Pension Funds Foundation.
Currently, pension plan assets in the United Kingdom total about 650 billion pounds($1.06 trillion).
If the United Kingdom does decide to join the mechanism, occupational plans must be ready, he said.
Mr. van Niekerk's project group already is in talks with a number of organizations, including the Dutch government, the Dutch Central Bank and commercial banks, the Amsterdam Stock Exchange, other institutional investors, employers' organizations, trade unions and retired employees. Its main aim is to collect and exchange information, as well as identify potential bottlenecks and solutions in the Euro implementation process.
"We do intend to take stock of the risks and costs for the pension funds" in the Netherlands, which have committed to joining EMU, said Mr. van Niekerk. "However, the way in which these risks and costs are handled will be a policy matter for the individual funds or for the umbrella organizations."
As of 1999, pension funds in Europe will be able to buy stocks denominated in Euros, though the Euro will not be introduced as a currency alongside the Dutch guilder for another three years. Nevertheless, beginning in 1999 the Dutch government will issue bonds in Euros, and Mr. van Niekerk predicted Dutch banks likely will offer Euro facilities.
Even though the timetable for implementing EMU is still to be issued, Mr. van Niekerk recommended that all pension funds appoint a Euro coordinator as soon as possible.
"This person will have to act as the point of contact within the fund, collecting the information from the various sources" and "generating ideas about the possible approach to this changeover," he said.
Top management also needs to be involved in the process, particularly because of the "high financial stakes" and "great potential risks," he said.