NETHERLANDS - The proposal to set up a pension protection fund in the Netherlands was deemed "useless" by asset liability management professor Guus Boender.
Boender, CEO of Ortec, an independent asset liability management company, explained why it was highly unlikely a Dutch pension protection fund would be set up.
"A fund based on the pension schemes' funding ratio makes no sense," he said. "The correlation between the ratios is too close."
"If a pension plan's funding decreases because of a drop in the equity market, then all other pension schemes will also be affected by this phenomenon," explained Boender, adding the protection fund itself would take a hit.
In his dismissal of guarantee funds, Boender suggested having a fund to protect against the bankruptcy of the sponsoring employer.
Pension plans themselves taking out insurance as a safeguard against the employer going bankrupt would make sense, he concluded.
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