The Dutch Pensions Federation has said it is pleased pension funds will be given more time to implement the country’s new financial framework regulations but worried the new rules will fail to promote a fairer balance between generations.
In its response to the new financial assessment framework (nFTK) submitted to Parliament yesterday, it said the proposal might improve intergenerational balance at the macroeconomic level but not necessarily at the level of individual pension funds.
It argued that the “new rules of the game” could actually lead to “skewed” outcomes.
The organisation said striking a fair balance between generations was about more than indexation alone.
It also pointed out that other elements of pension plans, including contribution levels, the distribution of possible benefit cuts and risks within the investment policy, should be taken into account as well.
Pension funds, it said, should be allowed to tackle those elements in a way that best suits them, and calculations of the impact of the new regulations should be made for individual pension funds to see whether their concerns are warranted.
ABP, the country’s largest pension fund, said it was still worried about the limited options in the nFTK for indexation of pensions to keep up with inflation.
It said it aimed to provide pension benefits that kept pace with the average salary developments in the public and education sectors, although it has yet to calculate the implications of the new rules for its participants, it said.
Senior citizen interest groups have also expressed concerns about the limited possibilities for indexation.
According to one such organisation, ANBO, the new rules “limit the possibility pensions will be raised to keep up with rising prices”.
It added: “It will also become harder to make up for lost indexation incurred in the past.”
ANBO director Liane van der Haan said: “Millions of Dutch citizens have seen the buying power of their pensions decrease by 12% over the past six years. In addition, dozens of pension funds have had to cut benefits.
“Now the chance of indexation will be further decreased because state secretary Jetta Klijnsma is raising the capital buffer requirements.”
The only certainty Klijnsma can offer with the current draft legislation is that younger participants will certainly face lower pensions, and seniors will have less buying power, according to two other senior groups, KNVG and NVOG.
Leo Witkamp, director at PNO Media pension fund, criticised the solvency buffer requirements at the annual FD Pension Pro IPN conference last week.
He said the nFTK had taken a wrong turn and that, in its current form, it would lead to unchecked buffer accumulation.
Regarding the required buffer level, an explanatory note attached to the draft legislation states that the capital requirement will increase from 21.7% to 26.6% on average.
Pension funds will not be allowed to grant indexation unless they have a funding ratio of 110% or higher.