Klaas Knot, president of Dutch pensions supervisor De Nederlandsche Bank (DNB), has said the COVID-19 pandemic had increased the urgency of pensions reform, as its impact had made the current pensions system “absolutely untenable”.

In the television news programme Een Vandaag, he said a new pensions contract must offer pensioners the perspective of indexation.

Due to plummeting equity markets and interest rates, Dutch pension schemes’ funding levels had dropped by more than eight percentage points since the end of February.

The largest schemes in particular have seen their coverage ratios fall to less than 90%.

Last year, Wouter Koolmees, the minister for social affairs, decided to reduce the minimum required funding from 104.3% to 90% this year, pending the revised pensions agreement between the government and the social partners.

The DNB president, however, said it was too early to start discussing another deferment of rights discounts for ailing pension funds.

In a clarification of DNB’s annual report for 2019 during a press teleconference, he said the watchdog didn’t want to discuss the issue at the moment, “as only the funding level at the end of the year will be the criterion for cuts”.

“A lot could happen between now and then, and part of the losses might be recovered in the second half of this year,” he added.

Knot said he hoped for a “relatively quick” economic recovery when the COVID-19 pandemic had been brought under control.

“Once a recovery becomes apparent, financial markets tend to respond quickly,” he explained.

At the press conference, he also said the watchdog now focused on supervising short-term issues.

DNB will work with pension funds on procedural matters, such as the continuation of asset management, cashing in contributions, as well as benefits payment, said Else Bos, DNB’s supervisory director, adding that schemes’ plans for business continuity worked well.

Knot suggested that the COVID-19 pandemic would contribute to the continuation of low interest rates, and added that the current crisis is unlikely to positively affect the European Central Bank’s efforts to boost inflation.

Earlier, DNB announced that it would ease pension funds’ supervisory burden, for example by granting them a three-months leeway on submitting their annual statements.