NETHERLANDS - Underfunded pension funds will not be allowed recovery plans under the Netherlands' new Financial Assessment Framework (FTK2), according to Maarten Camps, the top civil servant at the department of social affairs.
He said pension funds would instead have to spread the effects of financial shocks immediately across the generations of participants.
He added that the FTK2 - which aims to provide a "real but conditional pension" - would also take into account a pension fund's specific financial position and liabilities.
However, for a 'guaranteed' nominal pension, Dutch schemes will still be able to stick with the current FTK, which will be renamed FTK1, as the rules will be tightened. The required financial buffers for FTK1, for example, will be increased by 5%, Camps said.
He also confirmed that social affairs minister Henk Kamp would outline his plans on the future FTK to parliament next month.
The risk-free forward curve for discounting liabilities - as well as the 'ultimate forward rate', a stable discount rate for very long durations to be established by independent experts - will be among the "building blocks" of the framework, Camps said.
He stressed that the point of departure for all changes following the Pensions Agreement was that the pensions rights of younger and older workers would be affected equally.
His department is still looking into the possibility of merging nominal pension rights - collectively and individually - under the current FTK into a new pensions contract for a real but conditional pension.
Camps denied the department was developing the new rules with the view to making the Dutch pensions system more attractive to other countries.
"We just apply our own quality requirements," he said.
He also indicated that the current uniform pension statement (UPO) would be replaced by a much more extensive "pensions dashboard".
This would show participants what their benefits would look like if they retired at 65, 66 or 67, as well as how changes in their personal circumstances would affect their pensions.
Camps said the guiding principles of the new approach would be "honesty, simplicity and effectiveness".
"Pension funds must provide absolute clarity about the future benefits of their participants, both under current and new pension contracts," he said.
"If the pensions sector had been clear about the fact that a pensions contract is not without risk, most of the resistance against the announced rights cuts could have been prevented."