NETHERLANDS - Pension funds will be allowed to inform their participants about the effects of the credit crisis on their pension in a letter, rather than through the prescribed label on indexation quality.

The letter is designed to communicate to schemes' participants the specific position of their pension fund, according the Authority Financial Markets (AFM), the watchdog on pension communication.

The AFM's decision comes after a call by the main lobbying organisations VB and OPF for a further delay of the indexation label, as the financial situation is said to be still too unclear to be able to deliver sound forecasts.

The representative organisations, which have today responded positively to the announcement, had argued it was difficult to get a proper picture of any future indexation because most of the pension funds are still busy writing their mandatory recovery plans.

The pension funds' letters must inform their participants within the second quarter of this year of the effects of the crisis and explain the recovery plans for indexation, contributions, pension rights and value transfers, stressed the regulator of pensions communications.

The AFM said it will consult pensions regulator De Nederlandsche Bank, the department of Social Affairs as well as the lobbying organisations about the ‘transparent' letter schemes must send out.

That said, pension providers found to be in solid financial health are still allowed to introduce the indexation label as initially prescribed, indicated the watchdog .

The AFM has yet to decide whether insurance companies, which are not subject to recovery plan rules, also need to send a letter to clients or whether they can go ahead with the introduction of the indexation label.

Introduction of the controversial indexation label had already been postponed from 1 January to 1 April 2009.

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