NETHERLANDS – Social affairs minister Aart Jan de Geus says he is no longer insisting on a one-year recovery period for all pension funds whose coverage ratio drops below 105% (Updates to clarify).

Although the minister is largely sticking to the one-year period, exceptions are possible in specific circumstances and in these cases a tailor-made approach will be needed.

A longer period will only be allowed if it’s clear there’s no extra chance of added disadvantage such as lower pensions rights, de Geus indicated in a further specification of the new financial assessment framework FTK, a part of the Pensions Bill.

Another condition is, that the maximum use of the contribution and indexation instruments offer sufficient chance of hitting the target within the extended recovery period.

"Practice so far has shown that a three-year term is usually adequate, considering the consequences for surcharge and value transfer," the minister said.

In order to avoid stacking of prudential requirements, schemes can only take the mortality trends, and not mortality-related factors, into account, de Geus made clear. “The other desired risk surcharges and prudential margins, are part of the calculation of the required own assets.”

The nFTK will also contain the new instrument of continuity analysis, which requires pension schemes to report on the expected development of the financial situation within the next 15 years. Although the schemes can choose their own set-up, the minister will set the parameters.

De Geus promised further consultation with the social partners on the parameters. He also announced talks with the ‘pension field’, on the indexation matrix, “to prevent potential problems, without altering the matrix’ aim, which is to provide consistency between pension promises, finances and communication.”

“In order to keep the administrative burden of pension providers manageable, the number of reporting duties will be strictly limited,” de Geus added. All data gathered by pensions watchdog De Nederlandsche Bank (DNB) would be stored in a non-public database, managed by DNB.

Furthermore, the ministerial has decided that a code of conduct for pension funds will be part of the Pensions Bill, and contribution discounts will only be allowed under strict conditions.