NETHERLANDS - The €41bn pension scheme PMT has said that it will have to apply a benefit cut of at least 6% by next April if financial markets fail to recover and long-term interest rates stay as they are.

In light of this prospect, PMT would appear to be the worst hit of the five largest Dutch pension funds, all of which published preliminary results for 2011 today.

The €246bn civil service scheme ABP is anticipating a limited discount, together with a premium increase, while the €26bn metal scheme PME has warned of similar measures - as yet undisclosed - if conditions fail to improve enough this year.

The €111bn healthcare scheme PFZW and the €32bn pension fund for the building industry (BpfBOUW) said they had managed to avoid - for the time being, at least - having to announce benefit cuts.

Despite the pension regulator’s recent softening of the discount rules for liabilities, PMT’s coverage ratio was just 88.5% at year-end, 6.5 percentage points short of its recovery plan.

The metal scheme said it would announce next month a raft of measures aiming to get its recovery plan back on track.

It attributed its unfavourable position to the low age of many of its participants.

“This has enhanced the effect of rising longevity and low long-term interest rates, the criterion for accounting liabilities,” it said.

To be able to avoid having to make benefit cuts in 2013, PMT’s coverage ratio would have to rise to 100% by the end of this year.

Metal scheme PME suggested a benefits discount would be inevitable, but said it would announce details next month.

At year-end, the scheme’s funding ratio was 90% - 6 percentage points short of its recovery plan target.

With a coverage ratio of 94%, ABP is also facing additional measures next year, according to its chairman, Henk Brouwer.

He said the temporary extra contribution of 1% would be raised to 3%, while a rights discount of 0.5% has become “a real option”.

He said steps would need to be taken to improve the scheme’s funding to 105% by the end of 2013.

Due to the easing of discount rules, PFZW will not need to make benefit cuts for the time being, according to director Peter Borgdorff.

His pension fund had a coverage ratio of 97% at year-end following the easing of the discount rules, which boosted PFZW’s funding by 4 percentage points.

“However,” Borgdorff added, “the outlook is still gloomy, and we really need a return of confidence in the financial markets and a rise of interest rates.”

With a funding ratio of 99.8%, BpfBOUW is in the most favourable position of the five largest schemes.

Its chairman, Henk de Pagter, said: “Our recovery seems to be achievable without a discount of rights and benefits.

“However, if financial markets don’t recover sufficiently this year, we must still consider cuts for 2013.”