NETHERLANDS - The Dutch parliament has approved the parameters of the new financial assessment framework for pension funds, or FTK, as proposed by Social Affairs minister Aart Jan de Geus.
The maximum risk premiums, set for equity in developed markets, private equity and emerging markets, are an average of 3%, 3.5% and 4% respectively. The corresponding figure for real estate and commodities has been set at 2%.
Furthermore, the maximum expectation for returns on fixed income will be 4.5%, after discounting investment costs.
The rules will allow minimum expectations for the increase of the salary and price index of 3% and 2% respectively.
"With expected returns, for example of 9% for equity from emerging markets, the parameters are quite high, but they are workable for the pension funds," Christian Democrat MP Pieter Omtzigt commented.
The MP indicated he was content with De Geus' promise that a new set of parameters will be developed by a new independent committee of the pensions regulator De Nederlandsche Bank, the Netherlands' Bureau for Economic Policy Analysis CPB and the Labour Foundation Star. "But I expect a more prudent advice next time," he said.
The present parameters will take effect as of January 1 2007. New parameters will be introduced as of January 1 2008.
On the indexation matrix - the base for an indexation label for communicating pension expectations to schemes' members - minister Aart Jan de Geus promised to run an extra panel test to enhance its clarity, Omtzigt said.
Earlier, de Geus had decided to merge the columns on indexation policy and granting of indexation in the matrix, to make the issue more understandable.
The indexation matrix - for pension funds and insurers - is meant to provide a consistent combination of raised expectations, financing and actualising of conditional indexation. In addition, it provides rules for communication on conditional indexation.
Schemes must inform participants on expectations on the likelihood of future indexation in five steps, varying from 0-20% to 80-100%. They must also add an explanation of the risk indication.
The matrix will come into force as of January 1 2007. The indexation label will take effect as of January 1 2008.