NETHERLANDS - Pensions regulator De Nederlandsche Bank has claimed the mandatory recovery arrangements of Dutch pension funds may reduce GDP by 0.15% a year or 0.75% by 2013.
The funding ratio of most pension funds has dropped below the legal minimum of 105% as a result of the financial crisis, and five-year recovery plans have had to be drawn up.
According to DNB, raising contributions - one of the options which could be applied by a pension fund to improve its cover ratio - will negatively impact on households' spending power and will therefore lower consumption.
In addition, the requirement of a higher employer premium will affect companies' costs and subsequently put pressure on employment and profitability, the regulator argued.
A number of schemes have requested their sponsoring company pay an additional contribution, which can come at the expense of the employer's investment plans, DNB pointed out.
Moreover, almost all pension funds have refrained from granting any compensation for inflation, which will negatively affect spending power of pensioners and also means a loss of assets for active participants, it said.
The watchdog also made clear that approximately twenty - mainly smaller - pension funds are taking cuts in benefits into account as part of their recovery plan.
However, the regulator also noted that it is not yet clear whether the largest effects of the recovery measures on GDP will be at the start of the recovery period, or whether the decrease of GDP will be spread out evenly.
DNB said it analysed over 340 recovery plans by deploying its macro-econometric model Morkmon to make this assessment.
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