NETHERLANDS - Dutch pension funds are facing average rights cuts of 8% in the next two years if the discount rate for liabilities remains unchanged, according to estimates by the social affairs ministry.

Even with an adjustment of the current discount rate - the three-months average of the swap curve -  cuts of at least 6% will be necessary in 5.7m cases, compared to cuts of 8.2% affecting 12.6m in the first scenario, a spokesman for social affairs minister Henk Kamp has confirmed.

The spokesman was responding to a story in daily De Volkskrant based on several leaked internal memos prepared for the minister, who is currently considering changes to the discount rates.

The current discount rules have been widely criticised by pension funds due to the funding ratio volaitility they cause.

Were the pension funds to apply a higher discount rate, their funding ratio could rise from 94.1% to 98.9%, the calculations at the ministry suggested.

Were the current discount rules to remain unchanged, the contributions for workers need to rise by almost 14% in order to achieve the required minimum coverage of 105%.

Kamp's spokesman stressed that the internal figures are based on the situation of June-end, and explained that pension funds must take any decisions for cuts based on the circumstances at the end of 2012.

Meanwhile, the minister released at statement, saying that he is - in consultation with the Pensions Federation, the social partners as well as supervisor DNB - looking at the options of "somewhat" limiting cuts

"Key is a balanced approach to the interests of both the older and younger generations of participants," Kamp said.

The minister further indicated that he is expecting to table his proposals in the second half of September.

Posting a message on Twitter, the director of the Pensions Federation made clear on Twitter that he was not pleased by the leaking of the memos.

"The discussions are not easy, and this doesn't improve things, However, the tough message can't be ignored. If we don't solve the issue, all generations will lose out," Riemen said, although he was not available for additional comment.

In a clarification of the federation's position, spokesman Gert Kloosterboer said that the lobbying organisation advocated the use of the ultimate forward rate in some form as new discount rate "in order to remove the volatility from the coverage ratios".

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