NETHERLANDS - The €242bn civil service scheme ABP has seen its coverage ratio rise by 6 percentage points to 111% so far this year, largely due to increasing long-term interest rates.
But Joop van Lunteren, ABP's vice-chairman, called for a change in the way liabilities are discounted - in spite of the fact his fund is considerably ahead of its recovery plan.
"The volatile interest rates are hampering the long-term policy of the pension fund because they increase the risk of sudden and rigorous decisions," he said.
Van Lunteren recommended replacing the present discount criterion - the forward curve - with a seven-year average to stabilise the pension fund's funding.
Because ABP's coverage ratio was still 105% at year-end, the board refrained from granting indexation for 2011 and maintained the funds' "temporary" 1% recovery contribution.
The civil service scheme reported a total return of 13.5%, with almost all asset classes contributing positively.
Equity emerging markets and private equity, with returns of 26.6% and 29.6%, respectively, were the best returning portfolios.
Credit and property generated 8.1% and 16.8%, respectively, while developed equity markets showed a return of 14.5%.
However, government bonds delivered no more than 1.8%, largely due to rising interest rates, pension fund officials said.
ABP's vice-chairman stressed that the scheme's results had been stable on balance since 2008, in spite of an unchanged strategic asset mix.
With a cost level of €90 per participant for pension provision, ABP is among the 25% of schemes with the lowest costs worldwide, Van Lunteren said.
"At service level," he added, "we are even among the best."
ABP's said its total asset management costs were 0.4% of its assets.
The vice-chairman further said that ABP was expecting to appoint a new chairman later this year to succeed Ed Nijpels, who left in February 2010 following criticism over his role on the supervisory board of collapsed DSB bank.