NETHERLANDS - The €1.4bn pension fund for dentists and dentists specialists (SPT) has seen liabilities increase by no less than 11.5% in order to anticipate rising longevity.
In its annual report for 2010, the scheme said that the financial provision included an additional 3% to counteract the suggestion by Statistics Netherlands (CBS) that high earners were living longer on average.
With its coverage ratio of 99.3% at year-end, SPT indicated it was 3.4 percentage points behind on its recovery schedule for 105% funding in 2013, but insisted that a timely improvement is still achievable.
SPT's annual report was issued by curator Erik van Houwelingen, who was appointed by the Amsterdam business court (Ondernemingskamer) to steer the dentists' scheme into calmer waters.
The appointment happened at the request of pension regulator De Nederlandsche Bank, following a dispute between the SPT board and the occupational pension association (BPVT) about a new governance structure.
The conflict at the pension fund came on the back of an over 10% rights discount, mainly caused by the financial effects of rising life expectancy, in combination with the fact that the scheme has been closed since 1997.
The curator has been tasked with setting up a sustainable and widely accepted governance structure and with assisting the stakeholders appointing a new board.
SPT said it returned 7.1% on investments, including a 3.1% loss due to its full currency hedge through forward contracts and its full equity hedge through derivatives.
That said, in order to profit from rising equity markets, SPF has decided to limit its equity hedge - through options - to a market decrease of at least 20%.
However, it has kept its full hedge of the interest risk on liabilities through swaptions, based on a full protection at a 30-years interest level of 4%.
SPT's 41% equity holdings yielded 16.4%, while its 53% fixed income portfolio generated 2.9%, with convertible bonds returning 21.6%.
Officials at the dentists' scheme further made clear that it has established an outsourcing committee to improve monitoring and evaluation of contracted-out activities through service level agreements (SLAs), as well as protocols for evaluating the performance of its fiduciary manager and external advisers.
As a consequence, asset manager AZL has set up a balance risk monitor, whereas ING Investment Management Implemented Client Solutions has started quarterly reporting on specific risks in the portfolio, they added.
SPT has 7,565 participants in total, of whom 4,710 are active.