NETHERLANDS - Dutch social affairs minister Henk Kamp has dropped the mandatory application of the indexation label for pension funds.

Until further decisions about the label's future, pension funds can decide individually whether the label contributes to the communication with their participants, he indicated in a letter to Parliament.

In the letter, Kamp responded to a memorandum from communication supervisor Authority Financial Markets (AFM) about bottlenecks in the pension system.

The indexation label - a picture of stacked coins varying in height - was introduced in 2008, and was supposed to indicate a pension fund's indexation potential in the next 15 years.

However, in the opinion of the AFM, the label is not effective and should therefore be scrapped, and replaced by a general 'quality label' for pension schemes.

The minister said he will look into the AFM's suggestion, as part of a general evaluation of the effectiveness of the information clauses in the Pension Act.

He added that the question is whether the indexation label can meet its long-term objective, given the different character of the new pension contract, which is currently being negotiated by the social partners of employers and employees.

Gerard Riemen, director of the Pension Federation, said he welcomed the minister's decision on the indexation label. He described the label is "an example of failed communication".

"Stacked coins, to indicate the indexation potential of a pension fund, is a too simple way of explaining a complicated issue, and therefore prone to misunderstanding," he told IPE.

Riemen added: "Following the effect of the credit crisis, the label hasn't actually been used at all during the first year. Therefore, we think the label in its present shape should be binned."

The AFM also asked the minister to encourage the pension sector to adding information to the recently launched Pension Register.

However, in the minister's opinion, adding options to the online databank should be based on future experience with the service, and be carried out by the pension sector.

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