NETHERLANDS – Fewer pension funds in the Netherlands will have to apply rights cuts on 1 April thanks to the introduction of the ultimate forward rate (UFR) as the new accounting method for liabilities, according to the Dutch regulator (DNB).
The DNB said it now expected about 70 schemes to cut pensions rights by a weighted average of 1.9% in order to achieve the minimum required funding of 105%.
The rights cuts would hit 2m active participants, 1.1m pensioners and 2.5m deferred members, it said.
By comparison, last February, the supervisor anticipated rights discounts of 2.3% on average at 103 schemes.
However, it noted that five other pension funds had already cut the pension rights of 15,000 participants in total last December.
At year-end, the coverage ratio of pension funds was 102% on average, a 3.8-percentage-point increase over 2011.
The DNB attributed more than 3 percentage points to the introduction of the UFR, adding that the remainder had been down to rising equity markets.
It said its preliminary figures included those schemes that already expressed their intention of using the allowed cut cap of 7% in 2013, but might need to apply additional cuts in 2014.
According to the regulator, 40 other pension funds must this year announce likely rights cuts of 1.6% on average for 2014.
The 40 schemes have 1.3m active participants, 700,000 pensioners and 1.1m deferred members in total.
The DNB said it had not taken into account the possible additional contributions of employers, which could decrease the number of pension funds facing cuts, as well as the scale of discounts.
Pension funds must submit exact figures on funding and planned discounts to the DNB by mid-February.
They must also inform their participants and pensioners about rights cut no later than 1 March.