NETHERLANDS - The €1.7bn pension fund of insurer Delta Lloyd has granted its participants full indexation despite a funding drop of 4 percentage points to 117% last year.

In its annual report for 2010, the scheme said compensation for inflation had been possible due to a previous promise from the employer, as well as a return on investments of almost 11%.

It granted its 4,700 workers and 8,200 non-active participants an indexation of 2.5% and 1.4%, respectively.

The Delta Lloyd Pensioenfonds has placed 90% of its liabilities in a matching portfolio of fixed income investments - mainly in institutional fixed income funds of the employer - as well as swaps.

The swap overlay contributed 5.2 percentage points to the overall portfolio return of 10%, officials said.

The pension fund's return portfolio generated 15.7%, outperforming its benchmark by 50%.

Equity returned more than 20%, with investments in the funds Blue Return and DDL European Participation performing excellently in particular, scheme officials said.

However, property and alternative investments lost 0.5% and 12.7%, respectively.

The Delta Lloyd Pensioenfonds also said it had reduced the number of board members from eight to six to improve its "decisiveness" and the ratio between workers and pensioners' representatives.

The scheme has fully insured its nominal liabilities with Delta Lloyd Life Insurances, where it has also placed its assets.

Although the insurer is legally the owner of the assets, the pension fund said it had a considerable say in the investment policy.

The scheme also made clear it had to add 8.2 percentage points in total to its liabilities for increased longevity.

Delta Lloyd Pensioenfonds one of the few Dutch pension funds without recovery requirements.

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