Dutch regulator DNB is to increase its focus on ensuring that underfunded pension funds correctly reflect their financial position, as the possibility of benefit cuts loom for some schemes as of 2020.
Detailing its supervisory plans for 2019, the watchdog noted that most pension funds would be able to grant inflation compensation, but the situation was different for some large schemes.
It said that it “would ensure that the schemes involved keep on adequately reporting their financial position ahead of potential rights discounts”.
The regulator said it would highlight “unacceptable valuations and adjustments” on pension funds’ balance sheets.
DNB added that most pension funds, like in previous years, strongly depended on investment results. It called for “realistic” assumptions in pension funds’ recovery plans, adding that funds tended to postpone pension cuts for too long.
DNB said it would also check whether pension funds were on schedule to implement the legal requirements of the IORP II directive.
The regulator would scrutinise schemes’ ability to adjust to new legislation and a potential new pensions system, it said, even though it wasn’t clear yet in which direction pensions reform was headed after the collapse of the negotiations between the social partners and the government.