NETHERLANDS – The €292bn civil service pension fund ABP and the €137bn healthcare scheme PFZW, as well as their providers APG and PGGM, have criticised the Dutch government's volte-face on an inflation compensation for investments in infrastructure projects.

Finance minister Jeroen Dijsselbloem has concluded that providers of external funding should no longer receive inflation premium, following an evaluation of a €145m pilot project for the widening of the N33 – initiated by his predecessor Jan Kees de Jager.

The pension funds claim the road project could only be carried out thanks to this compensation, which they said was very important for their long-term financial obligations.

They said Dijsselbloem's position was at odds with the pensions sector and Cabinet's efforts to make local investments more attractive to pension funds.

Henk Brouwer, chairman at ABP, said: "We can only invest in Dutch infrastructure if the conditions are right for the pension fund and its participants."

Peter Borgdorff, director at PFZW, added: "It is a pity the government has already drawn a conclusion, while the pensions sector is still assessing how local investments could be increased."

Angelien Kemna, CIO at APG, said the N33 project had been a signal the government had overcome its "fear of cold water" for inflation compensation.

"We are very surprised the minister considers the pilot as a success, but turned down the inflation premium for reasons of principle, closing a source of long-term financing as a result," she said.

Else Bos, chief executive at PGGM, said: "In the coming years, the Netherlands needs dozens of billions of investment for modernising infrastructure, housing stock and energy facilities.

"To finance these projects, investment instruments with inflation compensation are necessary to mobilise sufficient assets from the pensions sector."

ABP, which provided approximately 85% of the total costs of the N33, said it had considered the new way of financing the infrastructure project as a potentially new asset class.

PFZW contributed to the remaining costs through its joint venture with building company BAM.

However, the inflation compensation for the joint venture's own assets would remain after the government's policy review, a spokesman for PGGM said.

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