NETHERLANDS - BPF Bouw, the €24.2bn scheme for the building industry, expects to eliminate its funding shortfall within three years by raising contributions and halting indexation.
Having only granted its active participants inflation compensation of 0.72% last January, the pension fund has now decided no further indexation will be granted unless the recovery process takes place quicker than expected as it had a cover ratio of 102.6% at the end of 2008 - down from 141% at the start of 2008 - but that fell again to 99.4% at the end of March so a short-term recovery plan is needed to pull the funding back up to 105%.
If the recovery plan works as intended, the cover ratio of BPF Bouw should reach its required financial reserves of 118.2% in 2020, said Mark Severs, a spokesman for the fund.
As an additional recovery measure, BPF Bouw is also raising contributions to the cost-covering level of 22.2%, after earlier raising premiums from 14.9% in 2008 to 18.9%.
Officials indicated that means the pension fund will not change its investment policy and its risk profile in order to raise its cover ratio.
BPF Bouw currently allocates 24% of its assets to property and 24.3% to equity while its fixed income investments constitute 49.1% of its assets, and the remaining 2.5% is invested in hedge funds and commodities.
The scheme lost only €1.5bn of assets in 2008, another spokesman, Franck Erckens, had stated earlier, and attributed the limit on losses to the scheme's 75% interest rate hedge as well as its 24% property allocation, which performed relatively well.
BPF Bouw - managed by BPF Bouwinvest and pensions provider Cordares - has approximately 846,000 participants, of whom over 210,000 are active and over 209,000 pensioners. The scheme has 15,000 affiliated employers within the building industry.
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