Criticism is growing among the Dutch pension schemes over the new rules the pensions regulator is set to introduce next year after the railways fund joined the attack.
Within days after healthcare fund PGGM attacked the stringent coverage requirements, the railways scheme Spoorwegpensioenfonds SPF joined the criticism of the DNB, the Dutch regulator.
Healthcare fund PGGM wants to get rid of the stringent requirement that Dutch pension funds have to repair any deficit within a year, according to chairman Karel Noordzij.
The demand is part of the new regulations of the Financieel Toetsings Kader(FTK). It states that schemes with a coverage ratio of less than 105% need to make good the shortfall within a year. The rules are set to be integrated in the new pensions legislation which still needs to be approved by parliament.
“The rule must secure the nominal rights of members and pensioners in case of immediate closure of the scheme. But for a branch scheme like ours there isn’t any risk of discontinuance,” said Noordzij.
According to him, the requirement of the regulator – the Dutch central bank – is thwarting PGGM’s investment policy.
“The focus of the regulator is too much on short-term risks. An absolute security in the short run will provide insufficient pensions in the further future”, explained Noordzij during a press meeting.
In his opinion, a short period for restoring levels will cause an average doubling of premiums to 30%, and it will be too cyclical, which will lead to high premiums during bad times.
The railways scheme does not agree with the DNB’s demand that pension funds should invest a larger part of their assets in bonds. “During this period of low returns it will negatively affect the yields,” says the SPF in an explanation in its annual report.
The SPF says the new rules should not apply to healthy pension funds like itself. It adds that “long-term reviews show that schemes are perfectly able to judge the risks of their investments and to adjust their investment policy likewise”.
SPF made its comments in announcing its latest financial results. It achieved a 9.1% return – against a benchmark of 8.7% – on its overall investments in 2004.

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