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Lower contributions requires good indexation - Donner

NETHERLANDS - Pension funds are only allowed to use freed-up reserves for premium discounts if they can fulfil the expectations they have raised on indexation, according to Social Affairs minister Piet Hein Donner.

Responding to parliamentary questions, Donner has stated compared to the previous pensions act PSW, the conditions for using the release of reserves - which are no longer required to be held if participants have retired - have been tightened in the new Pensions Act.

All reserves previously released as a result of participants' retiring - the so-called ‘buffervrijval' - could be used unconditionally for a discount on pension premiums.

These latest revelations were presented as a result of discussions on proposals for additional pensions legislation.

Any lowering of contributions, on the back of excess reserves, is not allowed if it is at the expense of the promised indexation, Donner insisted.

"Active participants could end up with a lower pension, and pensioners could lose future buying power," he made clear.

According to the minister, a lowering of inconsistent premiums will mean a lower indexation in the long-term.

Donner also announced a further clarification of the definition of ‘consistency' in the regulations for the indexation label will be introduced no later than July next year, as application of the label will be mandatory as of 1 January 2009.

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 julie.henderson@ipe.com

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