NETHERLANDS - The Dutch pensions communications regulator, the AFM, will start checking that pension funds are correctly using the indexation label from 1 April next year - three months after its introduction on 1 January 2010.
"We want to enable pension providers to base their indexation label on their most recent figures, which is the cover ratio of 31 December," said Flore Kraaijeveld, spokeswoman for the Financial Markets Authority (AFM).
The communications watchdog will check whether the label has been correctly applied to the relevant pensions documents, such as the welcome letter for new participants and the uniform pension statement (UPO).
"It is of the utmost importance that all participants receive up-to-date information on indexation, to provide them with the most accurate data regarding their expectations for future inflation compensation," stated Kraaijeveld.
According to the AFM, pension providers will be allowed to add a sentence explaining that the label reflects an expectation for indexation over an average of 15 years.
However, the Foundation for Company Pension Funds (OPF) is still unhappy with the mandatory introduction of the document which is designed to show the ‘indexation quality' of pension funds.
"As many pension funds are not in a position to grant indexation at all at the moment, we are afraid it will cause confusion," commented Frans Prins, director of OPF.
He continued: "Although most pension funds decide the indexation rate at the end of the year, some take this decision on 1 July. Moreover, schemes which are in a better position might prefer to further build up their assets instead of granting indexation.
"Rather than starting with the indexation label, we would like to inform our participants through a letter again," suggested Prins, who further argued that an evaluation of the label should be carried out as soon as possible.
Pension providers had the option in 2009 of informing their members about the effects of the financial crisis on their pension by letter, as there was concern that the indexation label would cause confusion in cases of underfunding.
However, social affairs minister Piet Hein Donner said he believes financial markets have sufficiently stabilised to apply the mandatory indexation label.
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