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Dutch schemes are 'weathering the storm'

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  • Dutch schemes are 'weathering the storm'

NETHERLANDS - Dutch pension funds have survived the market turbulence well so far and should be capable of withstanding further financial blows without jeopardising their financial commitments, Social Affairs minister Piet Hein Donner has suggested.

Most schemes still have significant financial buffers, and the majority of them still have assets exceeding their required reserves, Donner said in reply to questions from Pieter Omtzigt, Christian Democrat MP.

Six pension funds reported a cover ratio of less than 105% during the first six months of 2008 but three schemes have already solved their problems, according to the minister, by implementing the measures in their mandatory short-term recovery plans.

That said, 65 pension funds were understood to have a shortfall on their required buffer funds in the same period.

Almost one-third had solved their problems before they had submitted the prescribed long-term recovery plan, but 24 of the remaining 46 schemes have yet to submit a recovery plan, Donner added.

He claims pension funds are faring better in this crisis as the position of the Dutch pension funds was much worse at the end of 2002 when approximately 200 schemes had a cover ratio of less then 105%, and almost 400 pension funds had reported a reserve shortfall.

Donner's recent figures tally with the data of investment consultancy Mercer, which monitors 94 pension funds.

"At the end of June, almost 8% of our clients had a buffer shortfall, while the funding ratio of two schemes was less than 105%," commented Dennis van Ek, partner at Mercer.

"Since the end of June, when the average cover ratio for nominal liabilities was 129%, the funding ratio has decreased by another 3% on average," the pension adviser said.

Van Ek noted inflation - currently estimated at 3.2% in the Netherlands - is actually pushing up the required cover ratio, if the conditional indexation is taken into account.

"In order to reach a funding level that will allow for a risk-free full indexation, the average cover ratio must be between 155% and 160%," he pointed out.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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