The Dutch government has unveiled a new financial assessment framework (FTK) for pensions that is much less ambitious than originally planned and mainly corrects widely criticised elements of the current system.
Pension funds will have more time to implement the new FTK than originally envisaged and be permitted to apply the existing FTK to determine the contribution rates and indexation for 2015, even though officially the new FTK takes effect as per 1 January 2015.
Funds will have until 1 July 2015 to meet the requirements of actuarial rules for financial crisis planning, investment and indexation policy.
Those with a shortfall will have an extension of three months to submit a recovery plan.
However, pension funds must still apply the amended ultimate forward rate (UFR) and the new parameters for calculations for the Dutch regulator, the DNB, by the beginning of 2015.
Jetta Klijnsma, state secretary for Social Affairs and Labour, announced the changes in a letter to Parliament outlining the implementation of the new FTK legislative proposal.
The Cabinet approved the changes on 20 June.
The government has shied away from a wide-ranging reform of the FTK and instead focused on light-touch amendments.
Among other changes, funds may spread the impact of financial shocks over a longer period.
There will also be clear rules regarding indexation, and the impact of market volatility will be dampened.
Also, buffer requirements have been raised, and schemes must outline ahead of time how they intend to deal with windfalls or setbacks they might encounter in future.
The Council of State, in its advice on the impact of the proposal, said it “merely amends the existing FTK within the current framework of a nominal pension contract to make the management of pension assets more stable and contribute to a more equitable distribution of risks among the affected groups … in the management of assets”.
The Council of State emphasised that the FTK proposals were independent of a wide-ranging consultation exercise on the future of the Dutch pension system, which has just been started.