Dutch roundup: Recovering coverage, harsher prison sentences
The average coverage ratio of Dutch pension funds increased by 3 percentage points in February due to improving equity markets and increasing interest rates, according to consultancies.
Aon Hewitt and Mercer, employing slightly different methods, both concluded that funding increased over the period (to 106% and 107%, respectively).
Aon Hewitt noted that European equities returned 7% last month following the ECB’s announcement of its government-bond purchasing programme.
Both consultancies estimated that Dutch schemes’ global equity allocations returned 6% over the period, while the slight increase in market rates led a marginal loss for fixed income holdings.
According to Aon Hewitt, the average Dutch scheme’s investment portfolio returned 2% over the month of February.
Since 1 January, Dutch coverage ratios have been calculated using the current interest rate with the application of the ultimate forward rate.
In addition, pension funds also must use the 12-month average of their funding rate as a “policy coverage ratio”, which is now the criterion for indexation and rights cuts.
According to Aon Hewitt, the policy coverage ratio remained stable at 109% in February.
At 110%, schemes can start granting compensation for inflation.
Mercer recorded a slight drop in policy funding to 109.2%, according to Edward Krijgsman, team leader for monitoring.
However, Krijgsman and Frank Driessen, COO at Aon Hewitt Retirement & Financial Management, both stressed that, if the current funding failed to improve, the policy coverage would fall over the course of the year.
In other news, the Amsterdam Court of Justice has sentenced a former chief executive of the Philips Pensioenfonds and a former CFO of the scheme to five-year prison sentences for property fraud.
The court verdicts came following an appeal by the Public Prosecutor against initial sentences of four and three years, handed down by the Haarlem magistrates court.
Another former director of the Philips pension fund saw his initial prison sentence doubled to two years for taking bribes from a former director of property investor Bouwfonds, who received a seven-year prison sentence.
The court estimated that the Philips scheme and Bouwfonds had lost €150m and €100m, respectively, due to the fraud, discovered almost 10 years ago.
The Public Prosecutor pointed out that the parties had been able to claim back €141m in total to date.