Dutch Pension Slams Regulator as Funding Slips Further

(July 19, 2012) — The second largest pension fund in the Netherlands has used its latest quarterly report to urge the Netherlands’ regulator to act on an agreement made two years ago that could ease the nation’s underfunded plans.

PFZW, with €118 billion in assets, saw its funding ratio fall from 96% to 92% over the second quarter of the year, despite making a positive investment return. In a statement accompanying the figures the pension fund claimed continued inactivity by the regulator had led to the current state of affairs, and the immediate future was bleak.

The report said: “PFZW calls on government to speed up decision-making – An agreement in principle on pensions was reached in June 2010. Two years later there is still no final agreement. This is a complex matter that concerns the incomes of a large number of people. Pension funds will have to bring their pension schemes into line with the Pension Accord. Until the necessary decisions have been taken, PFZW cannot make proper preparations for what lies ahead.”

Managing director of the pension fund, Peter Borgdorff, said: “The time left for our recovery is steadily running out, making it increasingly likely that we will have to take measures. Interest rates are fluctuating sharply, but unfortunately remain very low. Although our assets under management have grown further due to the returns achieved, low interest rates and rising life expectancy mean that pension reductions and contribution increases may be unavoidable next year.”

Several Dutch pension funds, including the largest – ABP, have had to reduce benefits for members due to underfunding. In February, 80 Dutch pension funds revealed plans to cut benefits due to underfunding.

Borgdorff said: “Over 136,000 people answered PFZW’s call to say what they would like to see included in a new pension contract. We hope the government will also state its view and take rapid decisions, for example on whether to speed up the introduction of a new interest rate calculation method to provide a more realistic picture of pension funds’ long-term policy. This could mean that any intervention does not have to be so severe. Until such decisions are taken, we cannot present a clear picture to our 2.5 million members.”

In the second quarter of the year, PFZW made a 1% return, taking the year to date figure to 5.5%. By the end of last month, interest rates had hit 2.27%, down from just under 4% a year ago – at that point, PFZW was 110% funded, despite making a quarterly return of 0.4%.

Click here for the full report.