The Dutch government has rejected pension funds’ requests for greater leeway on their ability to raise their risk profiles.
In a letter to Parliament, Jetta Klijnsma, state secretary for Social Affairs, argued that any “additional margin” on risk would be neither necessary or desirable.
The state secretary was responding to a survey conducted by regulator De Nederlandsche Bank (DNB), which explored the options for Dutch pension funds wishing to increase their risk profiles – particularly those lacking only the requisite financial buffers.
With the introduction of the new financial assessment framework (nFTK) earlier this year, pension funds reporting a shortfall in reserves were given a one-off chance to adjust their portfolios.
To date, 40 schemes have applied for permission to do so.
Klijnsma, however, pointed out in her letter to Parliament that pension funds could also amend their investment policies within their existing risk profiles by “exchanging risks” – reducing interest hedges against lower equity allocations, for example.
In her opinion, a strategic investment policy also often provides the best opportunity to increase risk temporarily.
She said adjustments to a given scheme’s pension plan – as well as changes in the allowed estimates for future returns – could provide additional options for tailor-made approaches.
Klijnsma said pension funds without any shortfall could raise their risk profiles anyway, provided such a move tallied with participants’ attitude towards risk.