NETHERLANDS – The pensions and insurance regulator the PVK is to write to all Dutch pension funds about the changes to pension fund regulations and the Financial Assessment Framework, or FTK, next month.
Over the last few months, the PVK has been in consultation with several pension organisations, such as the OPF and the VB, about the technical details of the changes.
The Financieele Dagblad has reported that one of the most important issues the consultation is focusing on is a proposal by the PVK to ease the strict requirements for pension funds to increase their overall financial capital.
The daily said the PVK would allow pension funds not to take into account the current four percent interest on investments into their assessment of future liabilities. The latter change will be effective until 2006, when all liabilities need to be assessed with a variable market interest level.
The new proposals would mean that current coverage requirements will go down, if funds are allowed to put a system into account which does not account for the four percent market interest but will be based on flexible interest levels.
And it was reported that funds would be able to work with lower coverage ratio requirements, if they are willing to increase the currency period of their bond portfolios. This would mean in reality that it will become less sensitive for fluctuations of the market interest levels.
PVK spokesman Herman Lutke Schipholt told IPE that PVK has sent a consultation letter to the OPF and VB, which largely focuses on the technical details of the FTK.
ABP spokesman Marcel Vleugels stated that he does not yet have any views on the changes, as they are currently not yet involved in the consultation process.
After the current consultation round, a second round will be held to put into place the full-fledged new pension law. The timing of this was still unclear, the PVK said. However, when asked about the time schedule of the new FTK arrangements, the spokesman indicated that possibly next week the new FTK could be presented.
Alfred Kool of PGGM said pension funds don’t yet know the total proposal. However, he stated that the discussion around accounting of liabilities is very important. If the PVK requests liabilities against market value with flexible interest rates, then the one-year requirement to keep coverage ratios in order need to become more flexible.
Otherwise the whole issue could be still very negative on short term for financial position of pension funds.
Else in the Netherlands, the Dutch finance ministry has confirmed that Jean Frijns, chief investment officer at civil service scheme ABP, is to head the corporate governance committee.