NETHERLANDS – Europe’s largest pension fund, the 133-billion euro Dutch civil service Stichting Pensioenfonds ABP, is to submit a recovery plan to the pensions regulator PVK.
The plan involves increases in premiums and a cut in indexation. The fund has previously said that it needed to take “decisive action” to stem a decline in capital value.
The fund said it has made the plan, drawn up in consultation with the PVK, or Pensioen-& Verzekeringskamer, aims to stabilise its position in the short-term – eight to 10 years. It is aiming for a 115% coverage ratio, compared to the PVK’s initial demand for a coverage ratio of 135%.
“Further consultation will take place with the PVK over the long-term coverage ratio that is to be realised,” ABP said in a statement.
Earlier this year the civil service fund reported a 7.2% decline in its capital value in 2002 but said it saw no reason to change its investment strategy.
The plan calls for “an integrated premium and indexation policy”. It sees a broad distribution of risk between employers, employees and pensioners.
It is proposing a rise in the premium to 22.4% in 2004, up from 15.2% previously – though whether the premium will actually be set at this rate “depends on discussions being conducted with the social partners”.
Indexation, estimated at 2.7% in 2003, will be cut to 2.0%. It says that once the fund returns to financial health and the coverage ratio is above 115%, “indexation will be caught up on”.
“The objective of the recovery plan is to strengthen the financial position of the pension fund for the governmental and education sectors, to allow the scheme to withstand prolonged economic downturns and the impending ageing of the population.”