NETHERLANDS - The Dutch pension fund industry is unanimous in its opposition to new funding requirements for pension funds which it says are unnecessary and bad for the economy.
The funding requirements have been issued by the industry regulator Pensioen– & Verzekeringskamer (PVK). They demand funds bring coverage levels to 105% within 12 months.
The new rules “provide virtually no greater certitude in the long term, while at the same time imposing a heavy burden on the economy”.
This is revealed by a study conducted by Ortec Consultants led by Professor Guus Boender, commissioned by the pension fund umbrella bodies OPF, VB and UvB.
The report predicts that the measures would mean a considerable deterioration in Dutch macroeconomic prospects for 2004–2007. Wage costs in the business sector, for example, would rise by an additional 5.4% in 2003, and in the public sector by an extra 7.8%.
Corporate profits would fall in consequence by some 16%. Inflation would go up by an extra 1.2% if the requirements are implemented. In the period to 2006 investment levels would fall by an extra 4.2% while 138,000 jobs would be lost.
Professor Boender said there was a strong likelihood that index-linking will be abandoned and premium increases could add up to some 50% for the business sector as a whole and around 100% for the public sector.
Jeroen Steenvoorden, director of the Hague-based Dutch Association of Company Pension Funds, said: “We have used the UK in our lobby recently to show the negative effects of increasing mandatory funding levels or using international accounting standards. We are warned by the example of the UK.”
Peter Groskamp, executive director of asset consultants TMF Atlantic Bridge Portfolio Solutions, said: “The question you should put is whether it is necessary to be so strict.”
Marko van Bergen, head of Benelux institutional business at Amsterdam-based Barclays Global Investors, said: “Premiums have to rise, which have to be paid for by those corporate pension funds, which has to come from their earnings.
“This will cause them to have less ability to invest and satisfy their shareholders – so they will have to cut costs to offset the risen costs of pensions. Which means that it will cost jobs.“
Henk van Embden, managing director of Gouda-based actuarial consultants Buck Heissmann, predicted jobs could go in the hard-pressed telecoms sector.
Professor Erik Lutjens, professor of pension law at the Free University of Amsterdam, said the PVK’s pronouncement that index–linking of pensions had become unconditional in nature had overstepped the limits of its authority to impose policy rules, and the related mandatory maintenance of a reserve was legally untenable.
However, Paul Go, director of institutional marketing at Henderson Global Investors, cautioned against interpreting the report as unbiased.
He said: “This is the view of pension funds. Of course, pension funds are very much against measures taken by the PVK.”
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