Pension fund for Dutch hairdressers calls for discount-rate reprieve

Companies and workers in the Dutch hairdressing industry have called on the regulator to relax pension-liability discounting rules for pension funds with relatively young participants.

In a letter to Parliament, social partners for Kappers, the hairdressers’ pension fund, claimed the lowering of the ultimate forward rate (UFR) last summer had a disproportionate effect on so-called “green schemes”. 

They said the reduction of the UFR from 4.2% to 3.3% caused Kappers’s coverage ratio to fall by 7.6 percentage points.

By comparison, funding at other Dutch schemes fell by just 3 percentage points on average, they said.

They added that they expected this difference to increase to 12% by the year 2025.

Willem Kruithof of union CNV Vakmensen said: “We should be allowed to apply a fixed UFR or a fixed discount rate.”

Kruithof argued that pension funds with younger populations would have more time than older schemes to recover from economic “headwinds”.

“The supervisor and politicians base their policy too much on averages – the impact on specific categories can be very different,” he said.

“It is impossible to explain to participants, aged between 18 and 31, that their contribution is to increase while their pension rights will fall – following a postponed indexation, for example.”

Katinka Boekhorst, policy adviser at employer organisation ANKO, agreed that young pension funds were disproportionally affected.

René Lahoye, employers chairman at Kappers, said the current rules would hit pensioners in particular, “as they are facing a long period without inflation compensation”.

He added: “It would be reasonable to offer this group the chance to receive indexation through a slightly higher discount rate.”

As of the end of October, the pension fund’s coverage ratio stood at 97.4%.

The scheme, however, has ruled out a rights cut in 2016, following the rules of the new financial assessment framework (nFTK). 

In 2013 and 2014, it had to apply rights discounts of 7% and 2.8%, respectively, to improve its financial position.