THE NETHERLANDS - The present position of the Dutch pension funds is reason for cautious optimism, said Dirk Witteveen, director pensions of regulator De Nederlandsche Bank (DnB).

"The average actual funding ratio is 100% for inflation-proofed pensions. The nominal coverage ratio is 140%," he announced during the yearly meeting with the country's pension funds.

"Pension contributions now cover the costs, transparency is increasing, and all attention is now focused on improving manageability," Witteveen added.

"However, I am talking about averages," he said putting the figures into perspective. "And we are still susceptible to low interest, disappointing returns on equity and other investments, as well as shocks in the market.

"Compared with the early 1990s, we can't compensate for blows from extra reserves. Moreover, many schemes have become more economical."

According to Witteveen, the degree of supervision could be decreased, if pension funds put the accent on continuity analysis, and consider the solvency test as the lower limit for their required assets. "We should adopt this target as our collective challenge," he proposed.

Both the continuity analysis and the solvency test are important parts of the new Pensions Bill, which will be discussed in parliament during the coming weeks.
The solvency test is crucial for security and the stability of contributions, Witteveen indicated.

"Try to keep the period of underfunding as short as possible, and limit adjustments via contributions and indexation, in order to keep the apportioning of the costs and benefits between generations balanced," he stated.

The new supervision style will be based on principles, instead of rules, for example, pension funds need to make clear why they think they are compliant, Witteveen explained.

"The interference of the regulator will depend on how the schemes have arranged their financial and organisational aspects of their business," the DNB director added.

According to Witteveen, over half the Dutch pension assets are already being accounted under the new financial assessment framework, or FTK, which will officially come into force as of 1 January 2007.