NETHERLANDS - A new dual-approach financial assessment framework (FTK) will offer Dutch pension funds the option of providing their participants either nominal security or arrangements that target a real coverage ratio but depend on market developments and longevity.
Regulator De Nederlansche Bank is working with the department of social affairs (SZW) to develop the two-track policy, which is set to become law next year, according to Maarten Camps, a top civil servant at the SZW.
The first option - FTK one - will set higher financial buffers for schemes that want to stick to the promise of a nominal pension of 97.5%, Camps said, adding that pension certainty had been under-priced up to now.
At present, pension funds' coverage ratios must be at least 105%, while their required financial buffers have been set at a funding ratio of approximately 130%.
The FTK two will allow pension funds to balance risk, certainty and pension goals by allowing pension rights to move up and down with the financial markets and longevity, Camps said.
Under this option, he said, schemes could base their policy on the ambition of a real pension.
He said the costs of FTK two would probably be lower than those for FTK one, but he said he was unsure whether the arrangements would be cheaper than those of the present FTK.
Camps also stressed that the social partners of employers and workers should draw up new pension contracts quickly, as new arrangements must be in place at 1 April 2012 if their recovery falls short of their target at the end of 2010.