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Two KLM schemes fail to land on target

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NETHERLANDS  - Two of three pension funds of KLM, the airline, have seen their cover ratios decrease by up to 10% below the required minimum.

KLM’s general pension fund and its scheme for cabin staff had funding ratios of 95% and 96% respectively at the end of February, although the minimum required cover ratio is 105%.

The schemes attributed the decline in their cover ratios mainly to the downward trend of the long-term interest rates, although they said a further drop in the equity markets had also had an impact.

“The developments do not have a direct impact on pensions and pension claims,” the pension funds stressed, adding a study of the mandatory recovery plans has indicated “a solid potential for recovery, however under the condition of a recovering economy”.

The Algemeen Pensioenfonds KLM granted its 33,000 participants a full indexation earlier this year, based on a cover ratio of 110.5% at the end of 2008.

That said, the Pensioenfonds KLM Cabinepersoneel also delayed a decision on compensation for indexation, “until its financial situation had stabilised”.

KLM’s pension fund for flight personnel has granted its members full indexation, as its strategy has kept the cover ratio at 111.4%.

Although the scheme must present a 15-year recovery plan to pensions regulator De Nederlandsche Bank for falling short of its prescribed buffer of 115.9%, it has agreed a deal with KLM to apply a recovery term of 10 years, officials said.

The three KLM schemes, serviced by pensions provider and asset manager Blue Sky Group, had combined assets of €12.7bn at the end of 2007. Their funding ratios then stood at 123%, 122% and 115% respectively.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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