NETHERLANDS - Stichting Pensioenfonds ABP, the €168bn scheme for Dutch civil servants, is to formulate a “transitional policy” to deal with the new FTK rules.
“In 2005, ABP will formulate a transitional policy for the purpose of the FTK, which will include how to deal with the potentially extensive effects that the change will have on the fund, particularly in respect of its policy on premiums,” the scheme said.
ABP says the new rules - the Financieel Toetsingskader or financial assessment framework - “quite rightly” make it compulsory for pension funds to value their liabilities at market value.
The aim of the policy would be to achieve “greater stability” over future premiums.
It said: “Rather than advocating the use of extremely large, expensive buffers, ABP favours using a combination of stable premiums, conditional indexation and a long-term investment policy.
“This is appropriate for a pension fund that stands for utilising strict financial and risk management and a high investment return in order to offer the best possible pension.”
ABP returned 11.5% in 2004, with assets rising by €17.9bn to €168bn.
But the Heerlen-based fund said the fall in interest rates caused pension liabilities to rise by €18.1bn. This led to a slight fall in the coverage ratio to 121.3%.
This meant 2005 pension premiums have been raised and indexation set at 79%. “So a good year for the fund unfortunately has a downside as well,” said Jean Frijns, acting chairman of ABP’s board of directors.
Real estate returned 30.4% and commodities yielded 18.8%. Other returns include private equity (11.2%), equities (12.4%) while fixed income returned a higher than expected 6.8%.