NETHERLANDS - The Dutch association for industry-wide pension funds (VB), representing giant schemes such as ABP and PFZW, has revealed half of its 10 largest members now have cover ratios of 95% or less.

An increasing number of Dutch pension funds have seen ratios drop far below the legal minimum of 105% in recent weeks and almost no scheme has sufficient reserves left prohibiting an increase in pension payments in 2009, the VB has warned.

The organisation said in a statement at the end of November "half of the 10 largest industry-wide pension funds" had a cover ratio of between 85% and 95% as a result of a decrease in interest rates which force funds to reserve more money for future liabilities.

Though a rise in interested rates is widely expected, IPE has learnt the pension fund regulator and central bank DNB is currently debating whether or not pension funds should be allowed to choose between the swap curve and the more stable bond curve.

Hewitt Associates was one of several consultants last week to warn pension funds are being disadvantaged as liabilities are being discounted in the swap curve, instead of in the government bonds' curve where performance is healthier.

A spokesman for the DNB declined to comment on any such discussions.

Hewitt said in a separate study the average cover ratio of Dutch pension funds had dropped to 95% last week following a steep decrease in long-term interest rates. (See earlier IPE story: Pension funds see cover ratio fall to 95%)

PMT, the €30bn pension fund for metal workers, saw its cover ratio drop to 86%. Dutch media reports today claim PFZW, the second-largest Dutch fund, has a cover ratio of around 95%.

A spokesman for ABP, the largest Dutch fund, declined to comment on the VB's "band width" figures, stating the fund will reveal its cover ratio at the end of next week when it will make a decision about indexation.

The Netherlands' 10 largest pension funds are designed to deliver the pensions of some four million people.

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