NETHERLANDS - A pensions discount of 6% next spring is increasingly likely due to the stalling recovery, the €30bn metal scheme PME has warned.

The metal scheme saw its coverage ratio drop by 2 percentage points to 88% during the second quarter, while its recovery plan requires a minimum funding of 100% at the end of 2012.

It said it expected an improvement in its coverage of 3.5% after the introduction of the 'ultimate forward rate' (UFR) as the new discount rate for its liabilities.

But it also noted that the UFR effect would be limited due to PME's relatively large proportion of older participants, and said the new rate alone was not enough to stave off a rights cut.

The fund reported a Q2 return of 2.5% - with 1.9 percentage points coming from the interest hedge on liabilities - taking its first-half profit to 6.8%.

PME's fixed income investments returned 3%, but the scheme had to take a 2.9% loss on its equity portfolio, it said.

Its property holdings generated 1.1%, whereas its alternative investments lost 5.3%.

Meanwhile, the building scheme BpfBOUW looks to be the best placed of the five largest schemes in the Netherlands, with a coverage ratio of 96.4% at June-end - a decrease of 4.3 percentage points quarter on quarter.

Although it indicated that funding had increased to 98.8% on 13 July, it also highlighted the difficulty of making predictions on coverage-ratio developments. 

"If the funding is too low at year-end, we do need to consider a pensions discount," it added.

BpfBOUW, which has 807,000 participants, saw its assets increase to €34.5bn during the second quarter, mainly due to its interest hedge, which contributed 2.9 percentage points to its quarterly result of 1.9%.

Its equity holdings fell by 1.3%, while its fixed income investments returned 2%, with government bonds returning 0.3%.

The returns on BOUW's property portfolio were flat, it said.