NETHERLANDS - Most finance chiefs at Dutch listed firms expect to keep on sharing the risks of their pension funds, unlike elsewhere, according to a study by consulting firm Towers Perrin.
Towers questioned 134 financial directors of European listed funds. Of the 20 Dutch finance chiefs questioned, only a third expected a full defined contribution scheme within five years.
Companies are under pressure, due to International Financial Reporting Standards and the ageing of the population. Recently the Dutch SNS Group, DSM and Akzo Nobel have shifted investment risk to employees.
Companies have committed themselves to paying only a fixed premium, instead of filling the gap in case of a shortfall. “This way they can keep the volatility of the pension assets away from their company figures”.
“It is the culture of the Dutch pensions system that the risks are being carried by both employers and employees,” explained actuary Falco Valkenburg of Towers Perrin.
“Presumably a lot of Dutch companies want to get rid of their risks, but they might be realistic, and know that they’ll face a lot of resistance from the unions.”
Meanwhile, the €2.6bn Stichting Pensioenfonds IBM Nederland, or Spin, has reported a return on investments of 8.7% in 2004 – with its coverage ratio rising by 7% to 122%. Spin’s investment portfolio consists of 44% of bonds and 53% equities, of which 32% European equity.
Despite exceeding the funding ratio of 120%, which was set to triggering a rebalancing based on the strategic mix, the scheme has decided to stick to the ‘buy and hold’ strategy.
“The changes on pensions will probably lead to a rebalancing anyway,” it said.
And engineering firm Stork has reported a return on investments of 8.5% at its €2.1bn scheme. The coverage ratio was up from 108% to 112%.
The scheme said it is ahead of its scheduled increase of its funding ratio to 130%, as required by the new financial assessment framework, or FTK. It will probably reach its target before 2011.
The Stork scheme hasn’t applied an indexation in 2004. The indexation in 2005 will be 0.4%.