NETHERLANDS - The Association of Industry-wide Pension Funds (VB) will approach the Dutch government to relax the rules on pension funds' financial buffers required by the new financial assessment framework nFTK.

The nFTK requires pension funds to base their funding ratio on the actual market rate, instead of the fixed accounting rate of 4%.

Following the fall in long-term interest rates, combined with the drop in equity markets, the cover ratio of many pension funds has decreased to critical levels. If a scheme's cover ratio drops to less than 125%, the FTK prescribes a 15-year recovery plan.

"We are asking ourselves whether the present FTK rules are the best way to secure the security of pension funds, and their ability to fulfil their long-term commitments to their participants," Willem Noordman, VB employees' chairman pointed out.

"Based on the FTK, pension funds' situation can change within five months from being in the position to grant extra indexation, to having to draw up a recovery plan. However, what can go down within this time frame, could go up within five months as well," he added.

According to Noordman, VB will be urging a speedy revaluation of the FTK. "It could be the end of next year before any adapted rules can take effect. Meanwhile, the experience during the coming months can be taken into account in the discussions about change."

Under the FTK, pension funds have the participants' contribution level, the investment mix and the indexation as steering instruments for their financial position.

"Raising the premiums is complicated because of all the required consultations, and changing the investment mix is not advisable as a short term policy," Noordman stressed.

 Earlier this month, Joanne Kellerman, director of pensions regulator DNB, said approximately 10% of Dutch pension schemes were facing a cover ratio of less than 125%. [See earlier story: Dutch schemes drop below 105% funding]

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