NETHERLANDS - Dutch public servants fund ABP, with assets of €240bn, cannot afford inflation compensation in 2012 for the pensions of its participants and may have to consider cutting benefits if its financial situation does not improve by year's end.
If the giant scheme should fail to recover sufficiently by 31 December, the trustee board will decide "which additional measures should be taken".
ABP's board added that cutting pension benefits would be one of the options under consideration.
According to the scheme, its investments remain "fairly steady" considering the "bad weather" in financial markets.
However, the low long-term interest rate ABP must apply as the mandatory discount rate for its liabilities is the main reason why it is still facing a funding shortfall.
ABP reported a coverage ratio of 94% at the end of October. According to the scheme's recovery plan, it should reach a funding ratio of 104.5% by 2014.
At present, the financial situation does not allow the scheme to offer inflation compensation of benefits and pension rights in line with the average wage inflation in the public and education sectors, which stands at 0.25%.
However, the scheme will not as yet significantly raise premium contributions. The current contribution level - including a 'recovery surcharge' of 1% - will be kept at the present level.
Premium contribution for retirement and survivors' pensions stand at 21.9% as per 1 January 2012. Employers pay 70% of the contribution, while employees pay the remaining 30%.
If ABP's rate of recovery is deemed insufficient based on its status on 31 December, the temporary recovery surcharge will be raised from 1% to 3% in 2012.
Further options under consideration include raising premium contributions and cutting pension benefits, as well as accrued pension rights.
The scheme said: "If the trustee board of ABP should be forced to decide to cut benefits, the measure is scheduled to take effect in April of 2013."