NETHERLANDS - The legally required financial buffers for pension funds have been adequate in preventing shortfalls as a consequence of the credit crisis, according to social affairs minister Piet Hein Donner.

Less than 10% of all schemes - representing approximately €10bn of Dutch pension assets - had a cover ratio of less than 125% by mid-May, for which they are required to make a recovery plan, the minister said in a letter to parliament.

At the same time, the funding ratio of all schemes involved was over 105%, allowing them to meet their nominal liabilities, Donner made clear.

According the minister, the average cover ratio of Dutch pension funds has risen again to 140%, after a dip to 130% by the end of March and a high of 150% at the end of September.

A ‘standard scheme' in the is required under existing regulations to have a cover ratio of 125% of liabilities so the pension fund must inform pensions regulator De Nederlandsche Bank and present a recovery plan which may cover the next 15 years, if the funding ratio drops below this level.

A cover ratio of less than 105% must be rectified within three years.

The €2.7bn PNO Media scheme earlier this week reported it had a funding ratio of 114.5% at the end of March, but Leo Witkamp, chief executive, told IPE he now expects a recovery through a continuation of its present policy. (See earlier IPE story: PNO Media cover ratio drops to under 115%)

"As we have hedged 50% of our interest risks, the legal limit of our funding ratio is 119%. And because of the recovering equity markets, our cover ratio has gone up again to approximately 120%," he said.

Witkamp described the movement of the cover ratio, since the mark-to-market valuation of the long-term interest rates has been introduced, as ‘a yo-yo'. "The sector must get used to this phenomenon," he said.

In Witkamp's opinion, however, the mark-to-market approach is - because of its transparency - better than accounting based on the traditional fixed interest rate of 4%.

In his letter to parliament, minister Donner also made it clear less than 2% of Dutch pension funds' assets were previously invested in sub-prime-related paper. "In general, schemes have invested in debt with a high credit quality," he noted.

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