NETHERLANDS - The Dutch pensions regulator De Nederlandsche Bank (DNB) wants a general standard to calculate the market value of indexation promises when pensions are transferred from one fund to another.

The introduction of the label - slated for January 2008 - will mean funds need to give an overview of their indexation quality to show the degree to which the purchasing power of pension payments is likely to be protected against inflation.

The DNB has asked the three umbrella organisations for pension funds, the Association of Industry-wide Pension Funds (VB), the Foundation of Company Pensions Funds (OPF) and the Union of Occupational Pension Funds (UvB), to set up such a standard.

According to Peter Borgdorff, director of the VB, the process is still in its early stages and the organisations still have to agree on a single standard.

"It used to be simple - everyone worked with a fictitious discount rate of 4%, so a transferred pension value was also calculated with 4% and you could easily determine the cash value that you had to transfer at that moment," Borgdorff said.

However, this becomes more complex in the new environment of market valuation as interests rates are subject to fluctuation. Nevertheless, Borgdorff said he hoped that the umbrella organisations will have come to an agreement on a standard by this summer.

The move comes as the DNB has expressed fears of a potential exodus to pension funds with a higher indexation quality.

This might ultimately lead to depletion of pension schemes: "Funds with a relatively high indexation quality will become popular, they will receive many accrued pension rights, but at the same time they will have to deal with extra costs," the DNB said.

"For transferred pensions the funds will receive less than the market value and this will be at the cost of already existing participants. They will see the chance of indexation decrease, particularly with regard to transferred pensions. This could mean that pension funds reduce their indexation ambitions."

The VB has researched the possibilities for such a standard, but Borgorff declined to share the findings yet.

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