NETHERLANDS – The Dutch opposition has called for the new financial assessment framework, or FTK, to be delayed for a year.
The move would enable less rigorous rules for recovery in case of insufficient coverage to be developed, the main Dutch opposition party PvdA.
The present rules are so tight that, because of rigorous premium increases, they threaten to choke a recovery in the Dutch economy, argues labour party MP Gerdi Verbeet in the daily Het Financieele Dagblad.
Verbeet wants to lengthen the proposed one-year-recovery period if the coverage ratio drops under 105%. “This is unrealistic and unnecessarily short,” she said. The MP also aimed her criticism at the requirement of applying market rates, instead of a fixed accounting rate of 4%.
“The rising pensions pressure enhances the economic problems, because of higher premiums. Moreover, it affects a basic sense of security on state pensions, health care and other communal facilities,” she explained.
“The build-up of pensions shouldn’t be a yo-yo of economic ups and downs.”
According to Verbeet, a 1% drop in market rates leads to an increase of 10% increase in liabilities at an average pension fund.
“A coverage ratio of less than 105% often requires a doubling of premiums, in order to bring the funding back to the required level,” she said.
“Even without under funding, schemes are trying to build even higher buffers for safety reasons. A safe coverage ratio of 150% will mean extra premiums of over €100bn. This is an irresponsible burden for people’s income and the economic recovery.”
Earlier, the Christian Democrats, the largest coalition partner, have proposed allowing schemes a five-year-period for rebuilding their reserves. It wants to make the recovery of reserves less prone to economic conditions.
In March the Dutch pensions regulator, central bank DNB, announced that the FTK wouldn’t come into force for the insurance sector by 2006. The Dutch parliament will be debating the new Pension Bill, of which the FTK is a part, later this year.