Trade bodies warn against hard-hitting measures

NETHERLANDS - Dutch pension funds’ lobbying organisations have warned they will oppose any recovery measures that are could hit schemes’ participants hard, as long as it is not clear whether the consequences of the credit crunch will be lasting.

The VB, OPF and UvB have issued a statement arguing they would prefer pensions regulator De Nederlandsche Bank (DNB) to use its powers to issue specific recovery periods, based on a scheme’s individual situation.

Under the present rules, pension funds with a cover ratio of less than 105% must submit a three-year recovery plan by 1 April, while schemes with a funding ratio of less than 125% need to indicate how to recover within 15 years.

Options open to pension funds within a recovery plan are raising contributions, withholding indexation as compensation for inflation, as well as economising on pension arrangements while raising the pensionable age and changing the asset allocation to less risky - but potentially lower-returning - asset classes are also possible.

Discounting pension rights and benefits are also an option open to schemes although trade body officials have indicated they consider this to be a last resort, while acknowledging it could share the burden between the parties interested in a pension fund.

“In order to take the interests of all participants into account, improving the financial position of pension funds requires a combination of measures,” officials have stressed.

Despite the tough talk of the organisations, VB, OPF and UvB concede they would not oppose tough measures in the longer term if necessary “as recovery must happen, to prevent the pension burden shifting into the future”.

However, they also believe the present crisis shows the risks for pensions are larger than initially assumed, stating: “this requires reconsidering how risks and security are spread among the parties involved”.

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