NETHERLANDS - Pension funds must make pension risks more transparent to their participants, the Dutch pensions research organisation Netspar believes. Funds should also focus on real guarantees, which should increase with age.

In addition, they should keep on taking investment risk and stick with the principle of solidarity, according to economists Lans Bovenberg and Theo Nijman of Netspar, an academic centre for pensions, retirement and ageing.

The pension sector must also develop instruments against inflation risks and longevity risk, Bovenberg and Nijman indicated during a debate about the effects of the credit crisis.

For the medium term, the economist called for lower indexation,  and argued for an economised pension build-up as well as a rise in the age of the state pension AOW by two years to 67.

The large union FNV Bondgenoten is proposing there should be a flexible AOW age of between 63 and 70 as an alternative, according to Peter Gortzak, its vice-chairman.

However, he claimed the existing automatic retirement at 65 must stop and a stable long-term contribution must be introduced.

Benne van Popta, employers' chairman of the Association of Industry-wide Pension Funds (VB) and the pension fund for the retail sector, questioned whether solidarity is tenable between the generations, as the contributions instrument is insufficient in tems of keeping pension funds' finances sound.

"The risk is that different generations will opt for their own [pension] scheme," he suggested.

Guus Boender, an expert on asset-liability management at Ortec Finance, said there was a need for adjustments to the financial assessment framework FTK, to reflect worldwide efforts to bring interest rates down.

Schemes are making wrong decisions about their real funding ratios, Boender argued, because long-term rates are considerably affecting pension funds' nominal cover ratios.

In the opinion of Bas Werker of Netspar, pension funds should not exclude the prospect of cutting benefits.

"A 2% cut during 1% inflation is less damaging than refraining from indexation while inflation is at 5%," he stressed.