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Dutch cover ratios rise to 109% - DNB

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NETHERLANDS - The cover ratio of Dutch pension funds improved by an average seven percentage points to 109% during the third quarter of 2009, according to pensions regulator De Nederlandsche Bank (DNB).

Industry-wide schemes and companies pension funds recovered to an average cover ratio of 107% and 116% respectively, while occupational schemes for professionals, such as notaries and medical consultants, reached a funding ratio of 121%, DNB's newest statistics revealed.

By the end of September 2009, however, the cover ratio at 108 schemes - representing 1.1 million participants - was still short of the regulatory minimum requirement of 105% which must be reached within three years of a deficit.

In contrast, the funding level at 37 pension funds had surpassed the upper regulatory limit of 130%, which has to be recovered within a maximum of 15 years if pension funds fall below that funding level.

Of the 533 pension funds surveyed, over 58% had to draw up a recovery plan in 2008, according to the supervisory body.

Additional information from the DNB revealed that over 89% of the schemes had contracted-out over 30% of their asset management, and over 83% had placed their administration with external parties.

Pension funds granted their active and non-active members average indexation of 0.46% and 0.37% respectively in 2009, compared to 2.24% and 1.97% respectively in 2007, according to the DNB.

At the end of Q3 2009, pension funds' combined investments in equity and fixed income were €219bn and €339bn - down €8bn and up €52bn respectively compared to the same quarter in 2008. Investments in property also fell by €9bn to €64bn, while investments in hedge funds and commodities decreased €3.5bn and €6.7bn to €19bn and €9bn respectively during the same period.

DNB stated that pension assets - which totalled €740bn at the end of 2008 - made up 51% of the financial assets of Dutch households in Q3, equal to 120% of GDP and making the capital-funded system of additional pensions the largest in the euro region.

In 2008, the second pillar pension funds' share of pension assets was €619bn, while insurers managed €121bn for third pillar pension arrangements.

The supervisor further stated that Dutch pensions were equivalent to approximately 80% of an individual's final salary, but added defined contribution arrangements were falling behind, in terms of income equivalent, because of their exposure to fluctuating investment returns.

The DNB statistics also revealed that 383 pension funds had a visitation committee for internal supervision in place at the end of 2008, whereas 24 schemes had a separate supervision body.

A one-tier board was the preferred option of 37 schemes while eight schemes adopted an audit committee, yet the remaining 81 pension funds do not have arrangements in place to manage internal supervision.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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