NETHERLANDS - New accounting standards are forcing several companies, such as AkzoNobel, Philips and ABN Amro, to reconsider their current financial relationship with their respective pension funds.

And the director of the OPF, the Dutch Association of Company Pension Funds, says the new accounting standards could have a significant indirect effect on the position of company pension funds.

At present, company pension funds are financially assisted in the case of negative results of their investment portfolios. Lower coverage ratios of the funds directly imply that companies, such as chemicals firm AkzoNobel, will have to pay millions to reinstate needed ratios.

Akzo chief executive Hans Wijers said during the presentation of the company’s fourth-quarter earnings that ever-increasing pension costs are impacting overall company results.

Dutch media have been implying that there could be a further pension fund ‘privatisation’ to relieve the parent company of the negative effects on the financial performance.

Wijers stated that the financial results should present the performance of the company itself and not be influenced by share price movements and investment portfolios of the pension fund.

The last year Akzo is said to have paid around 471 million euros into its pension fund. The latter has negatively effected overall financial results.

Pieter Lakeman, chairman of Dutch investor group SOBI, told IPE that he has asked Akzo’s financial injection to be taken off the results - and not to be written off from company reserves, as is the case currently.

Lakeman says this is done so as to not hit directors, whose bonus scheme is tied to overall results. The possible negative effects of negative pension fund performance are already a point of discussion within Philips, ABN Amro and other corporations.

Akzo, the scheme, and other parties are maintaining radio silence on the matter.

Jeroen Steenvoorden, director of the Stichting voor Ondernemingspensioenfondsen is een koepelorganisatie, the Dutch Association of Company Pension Funds, stated that in general the new accounting standards can have a significant indirect effect on the position of company pension funds.

He said that some companies will try to set up a new framework to prevent that negative or positive results of the pension funds will affect the overall company results.

Currently there is a growing need to distance companies from their respective pension funds, by changing the financing agreement between the pension fund and the sponsor.

One of the possibilities will be that companies will agree to only set premium levels to be paid, possibly with a one off substantial start financing, after which the pension funds will be completely accountable for their own performance. The possible effect will be that there will be increased pension premiums largely to cover additional risks of a fund, if the parent company is not anymore reimbursing performance losses.