Sections

Dutch funds must pursue 'unpopular' measures to achieve funding targets

Related images

  • Dutch funds must pursue 'unpopular' measures to achieve funding targets

NETHERLANDS - Dutch pension funds should not automatically postpone a contribution rise if an increase is necessary, the consultancy AonHewitt has argued.

Delaying necessary premium increases can result in further problems for pension funds as their future cost would only rise, the advisor argued.

Aon Hewitt's comments reference the offer by regulator De Nederlandsche Bank to limit contribution hikes to the level where increasing costs are covered.

According to the consultancy, a contribution rise could be considered part of a wider number of measures - including rights cuts and an adjustment of the pension arrangements.

The consultancy urged pension funds not to postpone a rights cut if their coverage ratio had dropped below 100%.

"Pension funds should face their responsibility now, and enact unpopular measures," Frank Driessen, chief actuary at AonHewitt said.

"The recently published figures of the large pension funds are showing that there is no time for delay," he added. "Therefore, if pension funds find at the end of this year that they can't recover in time, they should take measures straight away."

Pension funds with a recovery plan must have increased their funding to a minimum of 105% in 2013.

Aon Hewitt further argued that pension funds should consider whether a recovery plan based on the maximum permitted assumptions for returns is still realistic given the current low interest level.

"This goes in particular for pension funds who have largely hedged the interest risk on their liabilities," it added.

According to Driessen, enacting unpopular measures sooner rather than later was more likely to create support among pension fund members than a decision to postpone measures.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2467

    Asset class: Search for a broker (mainly ETFs).
    Asset region: Global.
    Size: 250m.
    Closing date: 2018-08-28.

  • DS-2468

    Closing date: 2018-08-24.

Begin Your Search Here