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Regulator to force Dutch funds to raise surpluses

NETHERLANDS- Pension funds in the Netherlands are set to face more stringent funding requirements after falling financial markets and lower contributions have led Pensioen & Verzekeringskamer, the Dutch pension fund supervisor, to raise the amount schemes hold in surplus.

Representatives from the PVK met on Friday with the VB, the industry-wide pension fund association, and the OPF, the association for company funds, to discuss details of a letter it is sending every Dutch fund at the beginning of next week explaining the change in policy.

The PVK is not disclosing precise details about the letter’s contents only that it specifies surpluses held by funds need are to be increased. The three groups had what the PVK calls a “constructive meeting” and they are to make technical adjustments over the weekend.

Contents of the letter will be published once it has been distributed to pension funds on Monday or Tuesday. Under present legislation, funds need to be 100% covered and require an additional surplus depending on the percentage held in equities. Existing requirements are expected to be tightened up.

Explaining the decision to act, Loek van Daalen, a spokesman at PVK, says “the coverage percentage has gone down due to falling stock exchanges and due to a reduction in premiums.” According to the PVK, 300 or a third of all the Dutch pension funds are now, in their opinion, insufficiently financed.

Panicked press reports in the Netherlands have speculated that the regulator is about to force funds to sell their equities. Says Roos Kuip, communications co-ordinator at the VB: “ we don’t think that the panic in the Dutch press has any grounding. After all, what is happening to pension funds is happening to every financial institution.”

Figures released earlier this year by the WM company show Dutch pension funds turned in an average return of –2.8% in 2001. Individually the funds reported yields ranging from –8.6% to 4.5% with many of the country’s larger schemes at the lower end of the spectrum.

In the past five years, Dutch funds have yielded an average 8.6% and 10.1% in the last decade. Since 1991, equities yielded an average 13.7% per annum, way above the 2001 figure of –14.7%.

Earlier this year the VB announced 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.

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