NETHERLANDS - Dutch pension funds' existing pension contracts will have to be adjusted to have enough impact on the financial position of funds with shortfalls, risk management experts have claimed.

Speaking at the Pension Forum, Theo Kocken, chief executive at Cardano Risk Management, said: "If schemes keep on paying the full promised pension benefits while their coverage ratio is 80%, then they can hardly recover, not even if they generate returns at the level of the maximum allowed assumptions, as set by the Don Committee, during many consecutive years."

Kocken stressed that many Dutch pension funds needed to pay out 40% of their liabilities over the next 10 years, and that a mature and underfunded pension fund would be unlikely to recover from low returns.

He added that premiums were already at the maximum level and that sponsoring companies were reluctant to pay additional contributions.

"If you had a few very good investment years followed by a couple of bad years, things might be alright, but a reversed scenario will be disastrous," he said.

The Cardano director ruled out more risk-taking for higher returns, as this could "put the pension rights of the future generation at risk".

In Kocken's opinion, pensioners must be persuaded to be in solidarity with younger workers, for whom there "won't be any benefits left after a structural shortfall at their scheme".

Both pensioners and workers should contribute to recovery through a 'negative indexation' during bad years, to be capped at 10% for pensioners, he suggested, adding that workers should be encouraged to additional saving.

Guus Boender, professor of asset-liability management at Amsterdam's Free University, agreed: "Adjustment of existing pension contracts to overcome the financial problems is inevitable.

"By merely applying adjustments for new contracts, the problems won't be manageable, and it will take too long before the impact will take effect."

However, despite the introduction of more 'soft' and conditional pension rights, a hard lower limit should be part of new arrangements, argued Jac Kragt, chief risk officer of PGGM, the pension provider of the €90bn healthcare scheme PFZW.