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IMF backs PVK’s action on pension underfunding

NETHERLANDS – The International Monetary Fund has backed the Dutch pensions regulator’s action on pension underfunding, calling it “appropriate”.

“The prompt action by the pension supervisor to address underfunding was appropriate,” the IMF said in a report on the Netherlands. “Proposals to improve risk management, supervision, and transparency in this field are welcome,” it said.

Dutch pension and insurance regulator Netherlands’ Pensioen- & Verzekeringskamer has caused outrage in the Dutch pension industry with a requirement that pension funds have a solvency ratio of at least 105%. Earlier this month, Jan Snippe, chief executive of asset manager Schootse Poort Pensioen-en Vermogensbeheer, said the requirement could “destroy the system”.

The IMF also called for broader change to the Dutch pension system. “Cost-reducing reforms should also be considered, such as limiting indexation, moving further to average-earnings schemes, and raising the age of pension eligibility in light of longer life expectancies.”

The fund said the strength of the Dutch pension system was the “substantial and well established” second pillar. But the collapse in the stock market had uncovered problems of underfunding.

The IMF says the Netherlands needs to consider reform of the pension, disability, and health-care systems “to curb the rising costs associated with population aging and create room for growth-enhancing tax cuts”.

On the overall Dutch economy, the IMF said there were “reasons to be cautiously optimistic”. “We expect growth to rise gradually later this year, and to strengthen further in 2004.”

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