NETHERLANDS- The third of Dutch funds whose coverage levels have fallen below 100% have been given a year by Pensioen & Verzekeringskamer, the Dutch pension fund supervisor, to rectify the situation.

In a letter distributed to the country’s 1000 pension funds this week, the PVK has sent out a warning to the estimated 300 with insufficient coverage that it may intervene in the running of the scheme if the deadline of the end of next year is missed.

It has asked the relevant funds to submit details of their plans to counter the deficit, be it by raising premiums, getting money from mother companies or by increasing the age of retirement.

It has also tightened up the buffer funds Dutch schemes are required to hold. Under present legislation, schemes are obliged to keep sufficient reserves to cover a 35% fall in their equity holdings.

Loek van Daalen, a spokesman at PVK, say the letter has instructed funds to increase this level so that they have a sufficiently large buffer to cover a 40% drop off the highest valuation their equity holdings have reached in the last two years.

Funds are also required to be able to cover a 10% drop from the lowest valuation their equity holdings have reached in the last year. In practice, those funds with large equity holdings will require greater buffer funds. The PVK has told funds they have eight years to build up this buffer fund.

Explaining the decision to act, van Daalen says “the coverage percentage has gone down due to falling stock exchanges and due to a reduction in premiums.”

At the end of 1999, the average Dutch fund had a coverage level of 150%, a level that fell to 125% by the end of last year and one that now hovers marginally above 100%.

Representatives from both the VB, the industry-wide pension fund association, and the OPF, the association for company funds, were involved in the process and met PVK delegates last week to discuss the details.

Earlier this year concern at the lack of disclosure led the VB to announce it is to ask industry wide funds to supply details of their contribution levels, the indexation policy of their benefits and the extent of any surplus or deficit.

Figures will be published next March or April along with Z scores and the performance figures produced in conjunction with the WM Company.

At the time of the announcement a spokeswoman at the VB says it has received an increasing number of enquiries about levels of contributions and the indexation of benefits.