NETHERLANDS – Arbitrators have awarded the pension fund of Dutch financial services group ING €68m of the €170m the scheme had sought to compensate former employees’ pensions for inflation.

In February 2012, ING denied the scheme’s request to provide funding to raise former employees’ pensions in line with inflation as of January 2012.

According to a collective labour agreement between the two parties, ING must annually provide funding for indexation of pensioners and deferred scheme participants, regardless of the funding rate of its pension fund.

The company may refuse payment only on ‘serious grounds’.

ING invoked the ‘serious grounds’ clause in 2012 as it had in 2009 and 2010. But, unlike in previous years, it was unjustified in doing so this year, the pension fund said.

Pension fund director Daan Heijting told IPE sister publication IPNederland: “We accepted ING’s decision with regard to the time period from September to December of 2009 and for the year 2010, but have challenged the same regarding 2011 and 2012. In total, we have missed out on €400m.”

In 2011, a district judge ruled that ING was justified in its refusal to fund indexation as of January of the same year.

Last year, the pension fund decided to bring the dispute before a council of arbitrators.

The council ruled that, although ING was still justified in invoking ‘serious grounds’ to avoid paying inflation compensation in February 2012, those grounds were “decidedly less serious” than they had been a year earlier.

In February 2012, ING’s capital base improved, the financial risks associated with splitting up the banking and insurance businesses had decreased, and the overall outlook for the company had improved compared with the beginning of 2011.

The fact no indexation funding at all had taken place between 1 September 2009 and 31 December 2011 was also given significant weight in the ruling.

The arbitrators ruled that 40% of the pension fund’s claim would be granted and obliged ING to pay €68m plus 4% interest charged from 1 January 2012 to the date of remittance.

Heijting said: “We have asked ING how the ruling will affect indexation financing for former employees and retirees after 1 January 2012. If ING should provide indexation funding, the pension fund will be able to raise pensions. At this time it is not yet known when these decisions will be made.”

According to ING spokeswoman Carolien van der Giessen, the pension fund’s questions regarding the implications of the ruling would be answered shortly.

But she said it was still “too early” to say whether ING would reconsider its refusal to grant the scheme’s request to pay €40m to finance indexation as of 1 October 2012.