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Klijnsma to consult stakeholders on pension funds' 'dire' position

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Jetta Klijnsma, state secretary at the Social Affairs Ministry in the Netherlands, is to consult with the pensions sector, social partners, regulator DNB and the Bureau for Economic Policy Analysis (CPB) about Dutch schemes’ precarious financial position.

In a letter to Parliament, she said she and the regulator had grasped the “difficulties” pension funds were facing.

She did not, however, provide any possible solutions to these problems.

Klijnsma had previously suggested the government would consider raising the AOW state pension if pension funds were forced to discount pension rights.

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Minister of Finance Jeroen Dijsselbloem has also recently hinted at moves to “repair” purchasing-power imbalances. 

Funding at Dutch schemes – chiefly as a consequence of low interest rates, the criterion for discounting liabilities – has fallen to 95% on average.

The minimum required by the government is 105%.

If, by the end of this year, funding falls to 90% or lower, pension funds must start cutting pension rights.

At Klijnsma’s request, the regulator is preparing a report on current coverage ratios, as well as the recovery plans underfunded schemes must submit by 1 April.

Last week, companies and workers called on the Cabinet to stop the downward spiral in the pensions sector, the first time employers have publicly asked the government for action.

In January, unions argued that the regulator should reconsider its decision last July to lower the ultimate forward rate – part of the discount mechanism for liabilities – from 4.2% to 3.3%.

Hedda Renooij, pensions policy secretary at employer organisation VNO-NCW, said: “What matters to us, given the low interest rates and funding ratios, is that we can find an accessible road to a new pensions system less susceptible to interest rates.”

She added that the VNO-NCW had not proposed changes to the financial assessment framework (nFTK) or the current pensions system.

Meanwhile, the Dutch Pensions Federation has downplayed the loss of purchasing power for pension funds’ participants and pensioners.

Its spokesman said: “Because the nFTK allows for smoothing out discounts over a 10-year period, purchasing power would probably drop no more than decimal places.”

The real problem, he said, is “the lack of light at the end of the tunnel”.

“If interest rates remain at their current levels, many pension funds will find themselves in a worrying position.”

The Pensions Federation believes politicians must take the next step, “as pension funds are unable to solve the current problems”.

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