NETHERLANDS – The Netherlands' new financial assessment framework (FTK), recently released for consultation by state secretary Jetta Klijnsma, will not work in its current form, according to the Dutch Pensions Federation.

The lobbying organisation rejected the proposal of having different rules for contracts offering nominal or real pension rights, arguing instead that a single FTK – the 'FTK P' – should cover all pension plans and targets.

Gerard Riemen, the federation's director, said: "The suggested conditions for a real pensions contract indicate that the indexation must be at least equal to the consumer index, but many pension funds can't afford this.

"In addition, pension funds that stick with the nominal pensions contract are facing an investment dilemma, as the prescribed focus on certainty is at odds with the target for indexation."

The Pensions Federation said pension funds must be allowed to make investment choices on their own and subsequently carry out their own policies for meeting their long-term targets.

"Pension funds, rather than steer for certainty, must be allowed to use their targets as guidance," Riemen said.

"It should be up to the boards to establish the right balance between investment policy, contribution level and indexation target.

"Subsequently, supervisor De Nederlandsche Bank (DNB) can assess whether the weighting is consistent.

"As soon this has been confirmed, pension funds should no longer be forced to adjust their investment policy."

The Pensions Federation also objected to the proposed rules for contributions.

"In the current proposals," Riemen said, "the rules will spell disaster, as they will lead to premium shocks every five years."

The lobbying organisation said it favoured the current smoothing mechanism of the 10-year average of the forward curve, or smoothing based on expected returns.

"Together with the DNB and the Ministry of Social Affairs, we could determine what prudent returns are," Riemen suggested.

The Pensions Federation made clear to the state secretary that Dutch schemes want to avoid the legal risks arising from the merger of existing nominal rights into a pensions contract under real terms.

It also argued that any amendment to the legislation for tax-facilitated pensions accrual must give pension funds the option of covering indexation shortfalls and building up financial buffers in good times.

Riemen said: "We oppose a decrease of the tax-facilitated pensions accrual and favour a reduction of contributions, as long as the premium still covers costs, and as long the social partners can decide on the pension plan."

The Dutch Senate is to vote on the proposed FTK legislation in the near future, including the possible reduction of tax-facilitated pensions accrual.