Dutch funds can maintain expectations - for now
NETHERLANDS - Piet Hein Donner, minister for Social Affairs and Employment in the Netherlands, has decided that Dutch pension funds can continue to use the same maximum expected returns on investments as they have used in the past three years to calculate the level of pension contributions in 2010.
The best way to proceed after 2010 will be decided at a later date.
Donner made his decision known on Friday (25 September) after the ‘commission on parameters', which had been charged with advising the minister on the prudent level of maximum expected returns, failed to produce a unanimous recommendation.
The commission - also called the Don Committee, after its chairman, former Central Planning Bureau (CPB) director Henk Don - was divided on the issue. Three members, including the chairman, the representative of the Dutch central bank DNB, and the CPB representative were in favour of lowering the maximum allowed expected return on stocks by 1.5%. They argued that returns have been stronger in the past only because of lucky breaks that cannot be expected to be repeated in the future.
Such a substantial reduction of expected returns could, however, result in significantly higher pension contributions which pension experts said could run into billions.
"The parameters as proposed by one faction of the committee would result in a rise in contributions of somewhere in the region of €5bn," said Onno Steenbeek, Says APG director.
Committee chairman Henk Don spoke of a rise of €1.9bn.
The remaining two committee members who represent the Labour Foundation STAR and thus represent the so-called ‘social partners' (employers and employees) favour a much milder reduction of the maximum allowed expected return on equities by 0.25 percentage point. This might result in a more modest rise in contribution level, paid jointly by employers and employees, of €600m.
For our Dutch readers: Don't miss the exclusive interview with committee chairman Henk Don in the upcoming October issue of our Dutch title, IPN!
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