NETHERLANDS - The coverage ratio of Dutch pension funds has increased from 107% on average at year-end to 112% at the end of March, according to pensions regulator De Nederlandsche Bank (DNB).

During the pension congress of the Financial Markets Authority (AFM), Olaf Sleijpen, the DNB's supervision director, said: "Even after the worst financial crisis in history, the assets of pension funds are covering the schemes' liabilities again."

The improvement led Sleijpen to conclude that the financial assessment framework (FTK) worked "reasonably well" during times of crisis.

Referring to the FTK's requirement for financial buffers equating to a coverage ratio of 120%, the director stressed that these reserves did not equate to "dead money".

"The buffers allow pension funds to keep any rights discount limited and also generate returns for indexation," he said.

Sleijpen warned against overestimating the effects on the financial markets of pension funds' coverage ratios.

He said an important part of previous funding volatility was caused by rising longevity, which therefore required structural changes to the pension system, including supervision.

In his opinion, a new pension contract must be sufficiently transparent and, therefore, as simple and as easily explained as possible. In addition, it must be legally sound and implementable, he said.

At present, the social partners of employers and employees are still negotiating about the elaboration of a new Pension Agreement.

Sleijpen said, to allow the DNB proper supervision, the new pension contract must have clear and objective standards that can also be enforced. It must also provide clarity on the valuation of liabilities, as well as on modelling future scenarios, he said.

Moreover, there must be consistency between pension ambition, contribution and pension result, according to the director, who further underlined the importance of clarity on risks.

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