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Pension bodies propose new indexation label

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  • Pension bodies propose new indexation label
  • Pension bodies propose new indexation label

NETHERLANDS - Pension fund representative bodies have presented a new design to social affairs' minister Piet Hein Donner which they hope will replace the controversial design for the Netherlands' planned indexation label.

The collective - VB, OPF and UvB - have unveiled their own alternative to the government's plans for the indexation image which is based on three piles of coins, instead of the proposed image of a boat floating in high or low waters, depending on the status of a pension scheme's funding.

Tests on the clarity of the bodies' image have revealed it was correctly interpreted by a significant larger number of participants, including lower educated workers, according to the pension fund representatives.

The earlier proposed design (shown, right) caused controversy when first unveiled as pensions experts said testing had revealing while the image is supposed to demonstrate the indexation of a pension fund, people were confused by the image and unclear what it was designed to represent.

In this new label design, the left pile of coins reflects the expected rise of the consumer index, while the central pile shows the expected indexation relative to the rise of this index. The right figure indicates the expected indexation in case of a major economic downturn.

In their advice, the lobbying organisations noted the importance of proper guidance to accompany the indexation label.

"It must be clear that the label only refers to the indexation, and not to the entire pension plan. It should also be made clear that the label does not change the system of conditional indexation," they stressed.

"Participants will get a better result if pension funds are allowed to a flexible approach to indexation, rather than having a policy of unconditional indexation," the umbrellas explained.

According to VB, OPF and UvB, their concept is also better suited to supporting participants when deciding whether or not to have the value of their pension transferred to a new employer's scheme in case of a job change.

Earlier this year, minister Donner indicated he would be willing to accept a better alternative from the pensions sector.

"However, the minister still needs to make a definite decision on the logo as well as the moment of its introduction, which is now planned for January 1 2009," a spokesman for Donner confirmed to IPE.

Large employers' organisation VNO-NCW had objected to the initial image as well as opposition from the pension bodies.

"No less than 86% of lower-paid workers do not comprehend the label," Gerard Verheij, secretary of pensions policy at VNO-NCW, told IPE earlier this year.

"Because the indexation label focuses on only one aspect of a pension scheme, it suggests more than it actually means," he added.

VNO-NCW has since made it clear it remains sceptical about any indexation label because of the potential financial implications for companies, following the accounting rules IFRS, which prescribe companies to put pension liabilities on their balance sheet.

The lobby organisation said in a statement it would prefers communication through the uniform pension statement  UPO on how pension funds have indexed during the previous five years and what a scheme's present cover ratio is.

Initial proposals to introduce the label by 1 January 2008 have already been postponed because of doubts about is effectiveness.

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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