NETHERLANDS - Although the Dutch public transport scheme Pensioenfonds Openbaar Vervoer SPOV is healthy and has been able to apply a full 2.5% indexation to its pension payments, it still needs to be cautious, says its board.

A recent asset/liability study, and a test by an external actuary, have shown the coverage rate will decrease if the premiums stay at the same level.

And interest rates will be of increasing importance under new rules from the central bank, explains the board in its annual report.

The returns on SPOV’s investments were 7.6%, almost exactly according to long-term expectations. The coverage ratio – based on an interest rate of 4% - remained stable at 134%.

The regulator has set a minimum coverage ratio of 105% next year, as part of the new financial assessment scheme, or FTK. Based on the new requirement of valuation at market rates, the coverage rate in 2004 would have been 137%.

The indexed payments followed a rise in wages and higher pensions claims of the active members in 2003. There won’t be an indexation this year. SPOV’s board is expecting too low average returns on business values and real estate for being able to financing the market rates, and therefore any indexation.

The public transport fund has reported sufficient financial reserves for absorbing possible drops in market valuations. At the end of last year it had surplus reserves of €128m.

According to the report, the yield of investments portfolio as a whole was slightly below the scheme’s benchmark. SPOV’s total assets rose from €1.816bn to €1.950bn.