NETHERLANDS – The €125bn healthcare pension fund PFZW is to stand by its target of granting full indexation – following the salary index – for all its participants.

Peter Borgdorff, the scheme's director, said: "In addition, we will keep on steering with the contributions, which will only be lowered after we have achieved full capital funding for the surviving relatives' pensions, as well as high financial reserves."

PFZW is the first Dutch pension fund to state that it is prepared for a switch from the current nominal pension contract to a pension plan in real terms.

Speaking at a recent conference on risk management in the Netherlands, Borgdorff said PFZW's board opted for arrangements with flexible pension benefits, but that the fund would continue the current means of accrual, based on a cost-covering contribution.

The current premium is 24.2% of the pensionable salary and includes a recovery levy of 2 percentage points.

However, the scheme's board has already decided the contribution would be raised by an additional 2.5 percentage points if PFZW had to apply a rights cut.

According to Borgdorff, the healthcare scheme intends to merge existing pension rights into the new pension plan, "as this is also beneficial to pensioners".

Meanwhile, PFZW volunteered to take part in a pilot project announced by the Ministry of Social Affairs to shed more light on the financial and legal aspects of merging pension rights.

Borgdorff said his scheme still needed to find out how to explain the difference between pension rights in nominal and real terms to its participants.

He also said PFZW did not want to take more investment risk under real arrangements, but to continue investing at the current risk level.

During the conference, the director stressed that the board based its decision in part on 125,000 responses to a brief Internet survey and a subsequent, more in-depth study.

He added that PFZW would urge the Ministry of Social Affairs to introduce different discount rates for nominal and real pension contracts, as part of the new Financial Assessment Framework, which has been postponed to 2015.

Borgdorff told IPE to expect an additional discussion about the effect of a new pensions contract on the generations of participants within five years.

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