UFR boost not enough to avoid rights cuts at Dutch schemes
NETHERLANDS - New quarterly figures have shown that, out of the five largest pension funds in the Netherlands, only BpfBOUW, the €36.2bn scheme for the building sector, has managed to rule out the possibility of a rights cut.
The combined effect of the new discount rate for liabilities and a 4.7% third-quarter return boosted BOUW's coverage ratio to 104.7% and lifted the scheme out of an under-funded position.
The €45.4bn metal scheme PMT, however, said it would most likely have to proceed with a previously announced 7% rights cut on 1 April 2013, despite a 5.5-percentage-point increase in its coverage ratio to 91.2% at September-end.
The €31.3bn metal scheme PME, which saw funding rise to 93%, also conceded that it still expected to cut rights by 6% next year.
PMT put its difficulties down mainly to the relatively young age of its participants, which it said made the scheme "very susceptible" to rising longevity, as well as to low long-term interest rates.
All three schemes made clear that the most recent longevity projections would come at the expense of approximately 1 percentage point of their respective funding ratios at year-end.
PMT has already made a 13% provision to counter the effect of rising life expectancy.
The pension fund said it returned 3.2% on investments during the third quarter, taking the year-to-date result to 9.7%.
Its investments in equity, fixed income and property generated profits of 4.4%, 2.8% and 1.3%, respectively.
PME reported a return of 3.5% during the past three months and a year-to-date performance of 10.5%.
It said its holdings in equity, fixed income and real estate returned 5.3%, 3% and 0.3%, respectively, in the third quarter.
BpfBOUW indicated that the 'ultimate forward rate' - the new criterion for liabilities - had added 4 percentage points to its coverage.
BOUW reported a year-to-date return of 11.9%.