NETHERLANDS - The €1.4bn occupational pension fund for dentists (SPT) has announced a benefits cut of at least 9% to recover from a funding shortfall.

It said its financial position had come under pressure from the marked increase of longevity - the subsequent 10% increase of its liabilities caused its coverage ratio to drop to 88%.

Moreover, SPT's position has been made worse by the fact it has been a closed pension fund since 1997.

Lex van Gool, chairman at SPT, said: "Because we must pay present and future pensions from the present assets, without receiving contributions, we cannot afford to wait for better times."

According to SPT, a recent asset-liability study has indicated the scheme could recover by applying a benefits cut of between 9% and 15% for all participants.

However, because the funding of the dentists' scheme has risen slightly in the meantime, a 9% discount will probably suffice, it said.

Because its steering instruments are limited, the pension fund said it has largely hedged its equity risk, as well as the interest risk on its liabilities.

This lead to a return of 3.7% in 2008, but limited performance during 2009, according to the scheme, which noted that the modest returns had also limited its indexation potential.

SPF said the announced benefits discount would create a margin in its investment policy and increase its upward potential substantially.

Bram van Els, spokesman for SPT, said: "The board intends to replace the present collar-based equity hedge with puts, which will significantly increase its indexation potential for the longer term."

The pension fund for dentists has more than 7,600 participants in total, of whom 2,725 have already retired.

SPT has its pension administration contracted out to Heerlen-based AZL, while it has placed its asset management with ING.
 

Topics