Governance and funding to be scrutinised - Omtzigt
NETHERLANDS - A Dutch MP has warned local pension fund executives and trustees must expect tougher scrutiny in the coming months as questions will be asked as to "what went wrong" with and who is responsible for current funding levels.
Pieter Omtzigt, Christian Democrat MP, said while there have been many debates about pensions since funding shortages have surfaced, all executives and trustees at Dutch pension funds will face more challenges about their decision-making and ability to cope with the economic crisis.
More specifically, he said questions will be asked about asset allocation and risk strategies when he believes pension funds have had the tools to cope during the recent downturn.
"I'd like to understand why almost none of the pension funds have insured themselves against the lower interest rates, because the rules have been clear for the last few years on how they should calculate their risk. Clearly holding large amounts of bonds, they seem to have focused on very short-term debt, otherwise they can explain these losses. If they had hedged their bets they would have been buying long-term paper. We need to find out why that has happened," said Omtzigt.
Perhaps more worringly, he said members of the pension funds' supervisory boards and trustees should expect to face closer scrutiny of their own knowledge and capabilities in light of ongoing problems with cover ratios and pension buffers, as attention is likely to turn to pension fund governance again.
"Pension fund governance will come up with a vengeance, especially on the liabilities of the trustees and the board of directors. It will be an interesting discussion, though not a very helpful one right now. And I would like to know who carries which responsibilities," continued Omtzigt.
As part of that focus, he predicted there will be fresh impetus on the transparency of pension fund investments, as he noted
"The openness of pension fund investments has been seen as too much hassle. I tend to think pension fund participants should at least have the right to know what they are participating in," he continued.
"Pension funds have to publish the principles of investment, but they are extremely vague. And I could see why you would not want a daily update because it could affect market conditions and trading. But we should be able to see the risk position of pension fund takes, what is does and does not insure, what they invest in, and their preferences," he added.
The Dutch parliament has held three debates on pensions within the last two weeks.
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