NETHERLANDS - Dutch pension funds have consistently underperformed, missing out on more than €145bn in unrealised returns over a 20-year period, current affairs programme Zembla has claimed.
According to the programme, which aired on Saturday, the financial troubles of the Dutch pensions sector are due in part to "bad management".
Pension funds have invested too much in risky assets, and trustees lack the expertise to look after Dutch workers' pension savings, the programme contends.
In response, Christian Democrat MP Pieter Omtzigt has called for a hearing and debate on the matter in Parliament.
The programme had commissioned consultant Bureau Bosch to analyse Dutch pension fund investment results over a 20-year period from 1989 to 2009.
From the 1990s onwards, pension funds have allocated ever more to equities, resulting in more risk taking, according to the Bosch report.
Because of this, the two crashes of 2002 and 2008 had a devastating impact. According to the report, the financial problems today would be far less severe if pension funds had stuck with the less risky investment strategies they favoured in the past.
On average, Dutch schemes now allocate 61% to equities, Zembla says, referring to the report. During the 2002 dotcom crisis, Dutch schemes as a result lost some €50bn and saw their funding ratios drop from 200% in 1989 to 124% in 2002.
The credit crunch of 2008 causes the schemes to lose another €112bn, and the average coverage ratio drops to just 95%.
Dutch central bank director Joanne Kellermann has confirmed that the supervisor believes pension fund investments have been "too risky".
"Schemes take too much risk and have been warning against this for years," she said.
According to Zembla, the pension fund industry has wrongly insisted that risky investments are required to keep pensions affordable. The more risk-averse asset mix of 1989 - which on average consisted of 10% property, 75% fixed income and just 15% equities - would have fared much better, the Bosch report argues, adding €36bn to today's total pension assets and bringing today's coverage ratios up to 115%.
Pension schemes not only allocated too much to risky assets - in addition, their investments underperformed the benchmark to the tune of more than €145bn, according to Zembla.
Bureau Bosch found that over the period in question Dutch pension funds underperformed the MSCI Europe index.
The consultancy said: "This underperformance cost nearly €80bn, which amounts to €145bn today if one takes interest and investment returns into account."
Considering there are some 7.500,000 pension plan participants in the country, this comes down to a loss of €20,000 per plan participant, says Zembla.
The programme also raises doubts about the capabilities and expertise of trustee boards.
According to financial geography professor Ewald Engelen, pension fund management teams now resemble "Goldman Sachs-like investment banks", while trustee boards are still manned the old-fashioned way by union and corporate representatives.
He believes trustees are not equipped to keep an eye on what their management is actually doing.
The DNB's Kellermann agrees, saying: "It is high time to professionalise those trustee boards."
For his part, Frits Bosch said he never meant to say pension funds should not invest in equities.
"Perhaps the Zembla programme was a bit unnuanced in that regard," he said. "In the past, strategic allocations to equities were too high, but this is a tactical game - there are times, such as the present, when fixed income might be riskier than equities.
"In the short term, it may well be better to invest more in equities."
The Pension Federation - the umbrella organisation of united pension fund organisations - has strongly criticized the Bosch report.
It said: "Industry-wide schemes, representing some 75% of all participants, have outperformed the z-score benchmark. And the thought that equities outperform fixed income in the long term is widely acknowledged."
MP Pieter Omtzigt will call for a debate in Parliament tomorrow.