The Dutch pension fund of AkzoNobel expects to be able to grant indexation without an additional €400m contribution from the employer demanded by the trade unions, according to a report commissioned by the company’s central works council (COR).
Referring to the scheme’s recovery plan, submitted to supervisor De Nederlandsche Bank (DNB), the report said that inflation compensation already promised to members would be possible within five years.
The COR – an employee representative body – said that the recovery plan expected that funding would improve from 112% at the end of June 2018 to 138% in 2027.
Pension funds are allowed to start granting inflation-linked increases in part once their funding ratio hits 110%.
Full indexation is possible with coverage of at least 125%, and paying inflation compensation that members missed out on in previous years can start as of 130%.
Trade unions had demanded an extra contribution of €400m, taken from the €7.5bn proceeds of the sale of AkzoNobel’s Specialty Chemicals branch to private equity investor Carlyle.
The unions argued that they wanted the assets to improve the pension fund’s financial position, and last week began strike action over the dispute.
The company has rejected the demands, citing conflict with the accounting rules of IFRS as well as its promise to pay the proceeds to its shareholders.
The COR’s survey confirmed the company’s argument that the additional contribution would seriously damage AkzoNobel’s financial position. It suggested that the €400m should be used to improve other labour conditions as an alternative.
Recently, Aarnout Loudon and Kees van Lede, two former chief executives of AkzoNobel, called on the company to come up with an extra contribution for its pension fund.
They argued that the employer should compensate its pension fund, as the sale of several parts of the company had reduced the number of active participants and weakened the scheme’s financial position as a consequence.