ING pension scheme seeks arbitration over refused indexation
NETHERLANDS - The €12.5bn pension fund of bancassurer ING has sought arbitration after the sponsoring company refused to fund indexation for pensioners and deferred participants.
At the ING scheme, unlike most other pension funds in the Netherlands, the employer finances any pension increase for former workers - the increase does not depend on the scheme's coverage ratio.
Pension fund officials said ING should provide the necessary funds because there was "no important reason not to do so".
In a letter to participants, however, ING said it could not pay for the indexation due to new liquidity and solvency requirements, ongoing uncertainty in financial markets and the remaining loan from the government.
The arbitration between the two parties is in accordance with the contract between ING and its pension fund, which had a coverage ratio of 119% at the end of January. Its required financial buffers equate to a funding of 114%.
The scheme's participant council was "very unpleasantly surprised" by the company's decision and said ING was punishing its pensioners for losses on sub-prime mortgages made by its US subsidiary.
The council referred to a recent remark made by Jan Hommen, ING's chairman, who said he could not run a business without bonuses or punish the whole company for mistakes made by its US division.
Following widespread criticism, however, Hommen confirmed that he and his fellow board members would forgo their bonuses for as long as ING failed to pay back its remaining €5bn of financial support from the Dutch government.
Hommen was to receive a bonus of €1.35m over 2010.