NETHERLANDS – The Netherlands’ second largest pension scheme, the 45 billion-euro healthcare scheme PGGM, has submitted its recovery plan to the Dutch pensions and insurance watchdog, PVK.
The plan includes the move to a career-average scheme, a rise in premiums and the introduction of full indexation.
Dutch pension schemes are required to submit recovery plans by the PVK, or Pensioen-& Verzekeringskamer, if their coverage ratio falls below 100%, or if they do not have the significant reserves to cope with a drop in equity markets of 40%.
Schemes must also ensure that their coverage ratio is at 120% by 2012. PGGM has a current coverage ratio of 105%. Funds have therefore been forced to look at ways of increasing their funding without having to raise premiums too much.
PGGM says its recovery plan strikes a balance as it provides the highest possible level of indexation and ensures affordable contributions.
It aims to achieve a coverage ratio of 120% within eight years, and provide full indexation while the actual contribution rate is less than the notional cost-base contribution rate. PGGM says it will not be altering its “investment mix”.
As part of the plan, PGGM is proposing to switch to a career-average scheme as of January 1 2004.
Premiums will also be increased by 2.7% to 13% in 2004, while the cost-base rate will be increased from 15.5-16%.
Full indexation tied to salaries will be introduced, on a graduated basis ranging form zero indexation when the coverage ration is 90% or below, and full indexation if the coverage ratio is 120% or above.
These outlines have already been discussed with PVK, and PGGM says it has received a positive response. The plan has yet to be presented to PGGM’s advisory council, on which employers and employees in the healthcare, and social work sector are represented, but the spokesman for the PVK said given the positive response for the outlines, PGGM is hopeful that the recovery plan will be accepted.
Jenneke van Pijpen, a board member of the Abvakabo union, said that the members will discuss the plans and give their opinion by the end of October. She said that the proposals seemed fine. “The premiums are not too high – although it will be discussed how the increase will be split between employer and employee. Our main priority is full indexation, and the proposals regarding this seem the only possible thing to do in order to meet PVK’s requirements.”
PGGM’s move is in line with the 133 billion-euro Dutch civil service Stichting Pensioenfonds ABP, which submitted a recovery plan in the summer.