Dutch government and opposition parties are seeking clarification on the secondary legislation set to fill in the gaps of the new financial framework for pension funds (FTK).
In particular, several parties have questioned why the government intends to enshrine the indexation limit in secondary legislation rather than directly in the primary legislation be brought before parliament. The various parties are also confused as to how the cabinet has arrived at the lower coverage ratio limit of 110%.
The VVD liberal party, one of the two governing parties, in particular wants to know what shape the secondary legislation will take, seeking a timeframe and also clarity on whether it will actually come before the lower house. The VVD is also critical about the plan to allow smoothing of contribution levels based on expected returns, which is not in line with the Frijns and Goudswaard reports.
The Calvinist SGP party, which supported the cabinet in the lowering of the tax-free rate for pension accrual, says it is also seeking clarity on the risks of smoothing contributions and the cabinet’s opinion on objections by the AFM and DNB supervisors.
Political parties are also seeking clarity on why the new rules will allow underfunded pension funds to put off implementing benefit cuts for up to five years since this is set at three years in the current framework. The extension to five years was due to extraordinary circumstances and the D66 centrist party notes the Council of State’s opinion that this is an unsatisfactory choice.
Another question is how the balance of responsibilities would be distributed between the social partners, trustee boards and the supervisor. The governing VVD party has asked whether trustee boards will be able to override decisions on indexation and contributions that social partners have made.
The Central Planning Bureau (CPB) has calculated that the new indexation rules would work well on a macro level, but the D66 and Christian Union parties requested clarity on how equitable the new rules would be in practice for pension funds on an individual level.
The governing VVD and Labour (PvdA) parties want the cabinet to assess the effects that pension regulations over recent years have had, including the so-called September Package. The Christian democrat CDA party pointed out that policymakers have kept interest rates artificially low and is seeking an estimate on the effect on coverage ratios if the yield curve were to climb by 300 basis points.
At the request of IPE’s sister publication Pensioen Pro, Mercer estimated that mark-to-market coverage ratios would climb from their August-end level of101% to 140% if this were the case.
Some details in this article have been amended to correct translation inaccuracies.