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Dutch schemes’ Z-scores up for discussion

NETHERLANDS – The system of measuring Dutch industry-wide pension fund performance against a benchmark, known as Z-scores, could be up for debate later this year.

“The conclusion may well be that an entirely new assessment tool is needed,” the Dutch Association of Industry-wide Pension Funds (VB) says.

The VB has announced that all but two schemes passed the test for the 2000-2004 period. All compulsory industry-wide pension funds in the Netherlands are required to publish performance tests.

Of the 65 compulsory funds affiliated to the VB, only two failed to achieve the benchmark performance of -1.28 in 2000-04, according to the VB overview.

It said: “Good returns on investment, relative to the benchmark, were achieved despite the fact that pension funds gave precedence to modifying their investment policy in light of solvency requirements over and above maintaining a portfolio that stays close to the benchmark.

Failure to pass the test gives employers grounds to withdraw from mandatory participation.

The question now is whether the Z-score system itself us compatible with the new Financial Assessment Framework, FTK or Financieel Toetsingskader, for pension schemes.

It said: “When the Z-score is evaluated by the Ministry of Social Affairs and Employment later this year in the context of the Exemption regulation, the question of its continued usefulness in an industry whose yardstick is the FTK will certainly come up for discussion.

“The conclusion may well be that an entirely new assessment tool is needed.”

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