NETHERLANDS - The cover ratio of Dutch pension funds rose slightly in the second quarter of this year, according to new figures released by the Dutch pension regulator DNB.

In its Quarter Report September 2008, the DNB warned  an inflation shock could hit the financial position of the pension funds as well as the spending power of their participants, while negatively impacting the indexation ambitions of pension funds.

Following a €4m increase in the market value of pension funds' investments over the second quarter, the average cover ratio rose to 136% - a few percentage points more than the quarter before.

The average real cover ratio, the relationship between market value of investments and the indexed liabilities, as estimated by the DNB was around 100% at the end of the second quarter.

The 15-year interest rate rose in the second quarter from 4.7% to 5.1%, decreasing the market value of the pension liabilities by around €15m.

In its latest report, the regulator stated at the end of the second quarter three pension funds had a cover ratio below 105% - all three of which have handed in the required recovery plan devising how to eliminate the shortfall within three years - down from six funds in the quarter before.

DNB said the 65 pension fund which had a so called reserve shortage - a cover ratio lower than that belonging to the required capital - at the end of the first quarter had dropped to 46, though the regulator is still waiting for a long-term recovery plan from 24 funds.

The figures do not correspond with earlier DNB reports, however, stating 196 of the 700 Dutch pension funds had a cover ratio between 105% and 130% at the end of the first quarter. The DNB could not clarify the discrepancy before the deadline of this publication. (See earlier IPE story: 1 in 3 Dutch funds have long term reserve shortage - Mercer)

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