KPN to plug €390m pension funding gap
NETHERLANDS - KPN, the Dutch telecommunications giant, is planning to contribute another €390m to its pension fund over the next five years, in a bid to raise its funding level to 105%.
A statement issued by the firm this morning confirmed KPN's pension funding is under the minimum regulatory requirement of 105% of liabilities and the cover ratio has dropped again from the 100% seen at the end of December 2008 to 93.1%, so a top-up is being made which should avoid the need for cuts to pensioner benefits.
More specifically, KPN said it will pay €120m this year, and €90m each year in 2010, 2011 and 2012 to bring its cover ratio to 105% by 2013.
The firm announced in January it would be required to pay €120m into the fund this year as its cover ratio at that stage was 94% but had been 137.8% at the end of 2007. (See earlier IPE story: Dutch KPN pledges €120m for pensions)
Paying higher employer contributions means the acquired pension rights of active and deferred participants will be unaffected, according the firm.
Similarly, KPN's Getronics division will also have to contribute up to €12.5m between 2010 and 2013 to meet its pensions promise.
A letter on the KPN Pensioen website addressed to participants said the fund had suffered as a result of the earlier panic in the markets of last year but had seen interest rates on its investments lowered too, so whereas lower interest rates would usually lower its liabilities, a lower interest rate and its impact on the bonds market has instead lowered the cover ratio.
The pension fund's governing board decided to hedge 70% of its interest rate risk from the fourth quarter of 2008, so the actual fall in the cover ratio was limited somewhat by officials' preventative actions.
One of the methods being employed to facilitate the recovery plan is a freeze on all transfer valuations, to prevent individuals from moving their assets at this time, alongside no indexation payments for the time being.
Officials hope to still achieve a regular annual return of 6-7% or further contributions may be required.
The KPN has a total of approximately 50,000 participants, of which approximately 20,000 are employees, 20,000 are deferred members and 10,000 are pensioners.
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