The €2.2bn pension fund for the furnishing sector, Wonen, plans to merge with Detailhandel, the €13bn scheme for the retail industry.

However, in its annual report, it indicated that the intended merger has been delayed by supervisor De Nederlandsche Bank (DNB), which “had rejected the proposed solution for bridging the different funding level of both schemes”.

When asked by IPE, the board of Wonen declined to elaborate on the suggested solution, or to clarify at what stage the preparations for a possible merger were.

In its annual report, the board of Wonen said that last year, it had tasked a special merger working group with assessing the options of joining Detailhandel by 1 January 2014.

However, despite DNB’s objection, Wonen said that it had adjusted its pension plan to the current arrangements of Detailhandel, through reducing its contribution from 21.6% to 20.8% of the pensionable salary.

It also increased its franchise – the part of the salary that is excluded from pensions accrual – from €10,317 to €12,564, but kept the annual accrual rate at 1.75% of the salary.

Wonen, which had to apply a 3.6% rights cut earlier, reported a funding of 111.1% at June-end, when the coverage ratio of Detailhandel was 115%.

At the Pensioenfonds voor de Detailhandel nobody was available for a comment. The scheme has yet to publish its annual report for 2013.

The Stichting Pensioenfonds Wonen said that it lost 3% on investments last year, in part due to the effect of rising interest rates on its 57.4% fixed income portfolio, which generated 0.9%, but largely to a 5.9% loss on its full hedge of the interest risk on its liabilities.

It made clear that the introduction of the ultimate forward rate as the discount rate for its liabilities, triggered its decision to replace long-term interest swaps with swaps with a shorter duration, “in order to match the susceptibility to interest rates with the UFR methodology”.

In addition, Wonen said it converted its remaining swaption into a swap and subsequently froze its swaps portfolio. As this decreased the effect of the interest hedge, it indicated it would also look at the interest cover during its planned asset liability management study.

Wonen reported a 11.9% profit on its 22.3% equity holdings, and said it lost 2.9% on its 12.6% property portfolio last year.

The scheme returned 10.2% and 3.3% respectively on its private equity and infrastructure investments, but noted that private equity had underperformed 11 percentage points.

Its board further indicated that it had not adjusted its strategic investment mix, pending decisions on the new pensions contract, based on the new financial assessment framework (FTK).

The Pensioenfonds Wonen has 24,675 active participants, 91,805 deferred members and 13,150 pensioners.