NETHERLANDS - Dutch pension funds are not as poor as they look and calculation methods for liabilities will change to draw a more accurate picture, according to Dutch fiduciary management consultant Anton van Nunen.
Since 2007, pension funds in the Netherlands have been altering the rate at which liabilities are discounted from a fixed 4% rate to a variable swap rate.
Speaking at a conference in Salzburg today, Van Nunen (pictured) explained that liabilities fell for most pension funds, following this change, because the swap rates were higher but stressed "it was a very short-term view as it turned out".
Delegates at a pensionskassen workshop organised by the quantitative asset management research group IQAM heard van Nunen suggest this change in the pension fund system led to a "disaster" which he claimed will "kill the system soon".
That said, he also told IPE that talks with the regulator are scheduled and said he is convinced that there will be a change despite the DNB stating earlier this year it wants to stick to the current discount rate. (See earlier IPE article: DNB sticks firm to yield curve for liabilities)
He explained the swap rate was currently 80 basis points below the old rate and while currently 60% of Dutch pension funds are labelled "underfunded" by the regulator this figure would drop to 20% if the old rate was applied.
Van Nunen also demanded the static minimum cover ratio be scrapped, currently set at 105%, and replaced with a dynamic one which takes into account how the pension fund intends to recover lost assets over the coming years.
"Liquidity in the [pension] funds is almost always safeguarded and it should be published, as this would put pensioners at ease," noted Van Nunen.
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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