NETHERLANDS - Dutch pension funds will increase pension claims and benefits only slightly in 2011 due to their precarious financial position, according to supervisor De Nederlandsche Bank (DNB).

The regulator, which surveyed the 25 largest pension funds in the Netherlands, said indexation was falling short of the pension funds' target, which is based on the increase of prices and salaries over the same period.

According to the DNB, most participants and pensioners will receive no compensation for inflation, while pension contributions will rise from 16.3% to 16.9% of salary.

Despite strong investment returns, the average coverage ratio fell from 109% to 107% last year.

The DNB attributed the decrease to rising liabilities following low long-term interest rates, as well as to rising longevity, which equated to approximately 5 percentage points. The indexation target for 2011 is 1.1% for workers and 1.2% for pensioners, the pension watchdog said.

In 2010, pension rights were increased by 0.4% on average, whereas the target was a 2.3% increase for active participants and a 1.7% increase for pensioners.

The DNB found that the value of accrued pensions and benefits had fallen short of the indexation ambition over the 2003-07 period.

The supervisor further concluded that an extra indexation in 2008 could not compensate for this shortfall at most pension funds.