Indexation label enters choppy waters
NETHERLANDS - An indexation label, designed to give consumers clarity about future pensions indexation, is in trouble because several members of the preparatory committee have serious objections against its present draft.
A survey has revealed the set-up of the visual label - which is currently displayed as a boat floating in high or low waters depending on the status of a pension scheme's funding - is too difficult to understand for a large number of pension funds' participants.
"No less than 86% of lower-paid workers do not comprehend the label," said Gerard Verheij, secretary of pensions policy of the large employers organisation VNO-NCW.
"Because the indexation label focuses on only one aspect of a pension scheme, it suggests more than it actually means," he pointed out.
According to Verheij, the VNO-NCW has also objected to the label because of the potential financial risks for employers.
"We still don't know how accountants will respond to the financial implications of the label for companies," he said.
"The clarity is the bottleneck of the label," Frans Prins, director of the Foundation for Company Funds (OPF) responded, when asked by IPE. "As far as we are concerned, the label as it is should not be introduced."
"The present draft does not provide clarity on the difference between the scheme as a whole and indexation. Based on the label, a quarter of the surveyed participants would make a wrong decision," Prins explained.
Leny van der Heiden, acting director of the Association of Industry-wide Pension Funds (VB), also agreed "the present draft of the label has not made us very enthusiastic either".
But Chris Driessen, who represents union FNV in the discussions, is less worried.
"Many participants will get a better grasp of the label, when they look at it in combination with the uniform pension statement. And if necessary, we could improve the label while it is operational," he said.
Stef Blok, MP for the liberal party VVD, supported Driessen's stances as he said: "We would rather introduce the label without further delay and improve it afterwards."
Together with labour party PvdA, the VVD launched the proposal for the indexation label in 2006.
Initial proposals to introduce the indexation label by January 1 2008 have already been postponed by a year because of doubts about its effectiveness, however, pension funds and providers can use the label as of July 1 on a voluntary basis.
Social Affairs minister Piet Hein Donner is expected to inform parliament soon on the position of the indexation label.
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email email@example.com