TNO recovery requires no major change
NETHERLANDS - The €1.8bn pension fund of TNO expects to recover from its cover shortfall by raising its contributions and refraining from paying indexation.
The scheme of the institute for applied technical research institute said the required cover ratio of 116% could be reached within four years by sticking to its present strategic asset mix.
The TNO pension fund will raise the premiums for 2009 by 1.5% to 16.5%, while the employer will increase its contribution with an extra 2% on current arrangements.
The pension fund's board said the proposed measures take the interests of all the scheme's stakeholders equally into account.
The scheme's funding ratio was 103.2% at the end of the year - just under the required minimum of 105% - after a cover ratio of 133.9% at the start of 2008.
Two-thirds of the cover ratio's decrease was caused by the decline in long-term interest rates, officials claimed.
To limit a further drop in the funding ratio, the scheme had already taken de-risking measures such as decreasing its equity allocation by 5% and raising its interest-rate matching from 50% to 75%.
The TNO scheme said 47.8% of its strategic asset mix is in fixed income investments, while 26.3% has been allocated to equity. Non-listed property, a fund of hedge funds and private equity account for 9%, 6% and 9% of its investments respectively, while the remaining 2% are liquid assets.
Its 2.5% diversification into global tactical asset allocation (GTAA) has been spread over fixed income and equity on a 50-50 basis, the scheme said, adding that its interest risk is now hedged by matching 75% of the duration of the nominal liabilities through nominal interest swaps. Currency risks are hedged for 60% of assets.
TNO's pension fund reported negative returns of - 13.9% over 2008, which were partly offset by the 9% generated through its interest rate hedge.
The pension fund has 5,555 active participants, 4,800 deferred members and 4.245 pensioners.
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