DNB rejects 'small number' of recovery plans

NETHERLANDS - Pensions regulator De Nederlandsche Bank has rejected a ‘small number' of recovery plans, and is still discussing fine-tuning recovery proposals with approximately 50 schemes.

The watchdog, which declined to be specific about the exact numbers, said in an update on the vetting process that most of the 50 schemes will receive a positive verdict on their recovery plans.

DNB has now approved most of the 340 recovery plans submitted but approximately 20 pension funds had earlier indicated they may need to cut benefits albeit they do not have to take a final decision before next summer.

And social affairs minister Piet Hein Donner has decided unless it becomes clear that a delay is not sensible, the actual cuts to pension benefits and claims would not have to be made before April 2012.

According to DNB, it will take pension funds an average of three years to recover to the minimum required cover ratio of 105%, while over 80 schemes will need the full short-term recovery period allowance of five years, it added.

The regulator said its criteria for recovery plans are focused on the schemes' assumptions on investment returns as well as on their arrangements to keep the financing of pension plans separate from other early retirement schemes.

Moreover, pension funds had to clearly explain the soundness of additional measures, in case of a disappointing recovery period.

Most pension funds said they considered rising interest rates and returns on investments as the main contributors to a recovery, according to the regulator.

DNB said it cannot provide exact figures about contribution rises, but it is expecting less drastic measures than during the previous ‘pension crisis' of 2002-2003, as most premiums have been raised to at least cover costs since then.

In the long run, pension funds will need to further recover their financial buffers to a cover ratio of between 110% and 130%, depending on the risk profile of schemes' investments.

The regulator found that, while the Pension Act allows for a recovery period of 15 years, pension funds need an average of nine years to recover their financial reserves.

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