EUROPE - Dutch companies have been the hardest hit in Europe by pension fund deficits affecting their business competitiveness, according to Aon.

The pension consultants said the fully-funded DB schemes prevalent in the Netherlands had suffered deficits which sponsoring companies were under pressure to replenish from earnings or other sources. This had led to the biggest competitive disadvantage of any country in Europe.

Almost as badly-affected were companies in the UK and Ireland, whose pension schemes also follow a similar DB model.

In contrast, suggested the Aon Consulting European Business Leaders Survey, other European models have withstood the shocks of the global downturn much better.

Fully-insured and predominantly DC arrangements in Scandinavia, particularly in Denmark and Sweden, have performed relatively well. Systems have benefited from the fact that pensions sit on the balance sheets of insurance companies, which are required to keep capital buffers, so that funds have withstood market volatility and not impacted directly on sponsors.

That said, Aon has predicted conservative investment policies in these countries would make it harder to recoup portfolio losses, and suggested premiums are likely to rise in future.
In Germany and Austria, the survey said the book-reserved pension model has also demonstrated a competitive advantage in capital-constrained conditions.

The survey was carried out earlier this year, based on interviews with chief executives and senior consultants in 11 countries with total private pension assets of around €4trn.

It also attributed the disparity in pension fund performance to differing levels of state pension provision in different countries.

The survey found companies least affected by the financial turmoil are those whose pension liabilities are based in countries with the most generous state pension benefits, notably Austria, France and Spain, since private provision there tends to be lower than in other countries.

Aon warned, however, that liability calculation methods vary between countries, inhibiting transparency and introducing disparate levels of volatility in pension fund liabilities.

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