PME campaigns for bespoke recovery approach
NETHERLANDS - Hans van der Windt, director of PME, the €18.7bn pension fund for the metal and electronics sectors, wants the pension regulator to adopt a tailor-made approach that enables pension funds to recover at their individual pace.
PME, like most pension funds, can restock its buffers within 15 years - as required by the pension law - according to Van der Windt, though recovering from the current funding shortage within three years could become "problematic".
Moreover, not all pension funds are the same in terms of strategy and membership so some are able to recover more easily than others, and need less time, while others needs more to recover, suggests van der Windt.
"The angle should be: does a fund have the recovery capacity not only to get rid of the shortage, but also to build the buffer capacity?" he argued.
"If that recovery capacity is lacking, then there is a problem, but as long as a fund can show it has this capacity to get to a normal level then the question of which specific steps you take are less relevant," he continued.
HIs claim comes just after Nout Wellink, the president of the Dutch pension regulator DNB, announced: "It could be that we give a generic exemption for all institutions, who are not suffering too much, and extend the period to five years." (See earlier IPE article Cautious DNB examines recovery time)
ABP, the largest Dutch pension fund, today added its thoughts to the conversation, by pleading for "a substantial lengthening of the recovery period".
A spokeswoman for the fund said increasing the recovery period by a mere few months would not be enough.
More time to recover "prevents funds from having to take disastrous measures in the short-term, the impact of which would be felt by pensioners and pension savers," said the spokeswoman.
According to both ABP and PME, the Dutch pension law provides the DNB with enough space, in the form of article 141, to lengthen the recovery period.
It was only last week that the four largest pension funds in the Netherlands - ABP, PFZW, PMT and PME - said they saw their assets collectively drop by €71.6bn last year as a results of the credit crunch. (See earlier IPE Story €72bn evaporated from Dutch big four in 2008)
All four revealed their schemes are now in an underfunded position with cover ratios hovering at around 90%.
The Dutch association for industry-wide pension funds told IPE it has surveyed pension funds and thinks most pension funds are now underfunded, as cover ratios are currently between 85% and 100%.
DNB will decide before 1 March whether pension funds will be given more time to recover from the credit crisis, though Nout Wellink has stressed in advance he does not favour giving more time to repair their funding shortages.
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