NETHERLANDS - Aon Consulting has called for a joint initiative which would see Dutch consultants engaging in talks with pension regulator De Nederlandsche Bank (DNB) over pension funds' recovery plans.
One of the main points challenged by the DNB has reportedly been the pension funds' use of a wage-inflation assumption lower than 3%, the lowest rate allowed by the bank.
Sagoenie told Global Pensions most of his colleagues believed the DNB planned to comment not only on the lower wage inflation used, but also to ask questions about the underpinning of the investment returns and check on the consistency of all the parameters used.
According to Sagoenie, the DNB has indicated that there is very limited room for customization of the parameters used. He added: "This means that pension funds may have difficulties recognising the mandatory economic assumptions in their own recovery plan and vision; a wage-inflation of a minimum of 3% is not consistent with expectations in the short term - maximum five years - within which pension funds have to recover to 105%."
Aon consulting recommends schemes consult with the DNB before a recovery plan is submitted. In some cases, this has taken place. "This has led to better mutual understanding. Discussing the parameters before submitting the recovery plans will also lower costs," he said.
In contrast, Sagoenie said: "DNB must be very careful on the possibility of changing the rules while the game is still on, as our customers need to know their position. Moreover, adapting recovery plans will mean extra costs for pension funds as well."
The DNB declined to comment.
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