DNB hints at change to liability discounting
NETHERLANDS - Dutch pensions regulator De Nederlandsche Bank has hinted it might reconsider the way pension funds must calculate their liabilities.
At present, pension schemes have to base their liabilities on an updated yield curve linked to the inter-bank swap market.
However, the swap yield curve has been very volatile over the past few months because of the liquidity shortage at the long end of the inter-bank market, and has dropped below the government bonds' curve.
"This way, the yield curve is not invariably a reliable reference point for major policy decisions," DNB has acknowledged, adding it will closely watch movements in the yield curve until the end of the year.
"Should developments so dictate, we will inform pension fund and insurers soon after 1 January on how to act," the pension watchdog stated.
The DNB's chosen yield curve also affects insurers, who must apply the guideline for their adequacy test.
The Dutch Actuarial Society recently advised pension funds they can invoke an exemption of the Pension Act, which allows them to use the more stable bond curve, rather than the swap curve to calculate their liabilities.
The actuaries' initiative came after several consultants had warned pension funds are being disadvantaged for having to discount their liabilities in the swap curve, instead of the government bonds' curve.
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