NETHERLANDS - The introduction of new regulations to calculate Dutch pension premiums and commitments will lead to “a landslide”, according to consulting firm Aon.
Aon has also forecast that schemes will probably abandon final salary arrangements.
The Financial Assessment Framework, Financieel Toetsingskader or FTK, is part of new regulations, which from January 2006 will change the way pension funds calculate their commitments and will cause pension premiums to raise.
As pension funds report their assets or financial position annually in accordance with the new method, premiums could differ “greatly” from year to year, with fluctuations of up to 10%, Aon Netherlands’ actuarial advisory group says.
Managing consultant Rajish Sagoenie said that fund managers should take measures in areas such as investment policy.
“Without additional measures the fund could fall into the danger zone much quicker than is currently the case,” Sagoenie added.
“Pension funds must observe caution during the change-over to the FTK and not work too hastily,” Sagoenie said, recommending that pension funds assess their risks first and then adjust their investment, premium and indexation.
Aon has also forecast that, in the pursuit of certainty for pension premiums, schemes will probably abandon final salary arrangements.
According to a survey of the Nederlandsche Bank in 1998 more than 67% of pension participants had a final salary scheme, but the figure is now 13%.
The FTK would also bring “increasingly stringent requirements of supervisors”, a factor which will prompt about 700 smaller pension funds to team up with industry-wide pension funds or put their pensions into the hands of insurers.
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