NETHERLANDS - The €208bn (US$281bn) ABP pension fund will increase contributions by 3 percentage points, withhold indexation and de-risk some of its investments in a bid to return to solvency within five years.
Doing so, ABP said it hoped it would be able to protect member benefits and not have to cut payments, although it added indexation would not take place.
The fund also said it would reduce the risk of its investments during the recovery period, as required by the FTK law which governs pension plans.
In a statement, ABP chairman of the board of governors Elco Brinkman said "We must now take measures to make ABP healthy again in both the short and long term. We will do all we can to avoid reductions of pension rights.
"Unfortunately, the measures have consequences for our participants and former participants. We have strived to distribute the worst effects in as balanced a manner as possible between employers, employees, former participants and pensioners."
ABP said it projected a return to minimum solvency in four years and expected to reach a funding ratio above the minimum 105% within five years, reducing the need for drastic measures.
At the end of 2008 its coverage ratio stood at around 90%. It added, even without alterations to its contribution, indexation and risk policies, it would return to solvency in this time.
The fund added it hoped to return to 'full' funding of 125% within 13 years and would monitor the situation. If the economy improved more rapidly than projected, it would revise its recovery plan and reduce contributions accordingly
Should the situation deteriorate, it reserved the right to make further changes.
Under Dutch law, all pension funds with a funding level below 105% must submit a recovery plan to the Dutch pensions regulator De Nederlandsche Bank (DNB) ahead of 1 April.
In late February by the Dutch government announced an extension to the recovery period, from three years to five, as a result of the severity of the crisis and uncertainty over the global economic outlook (Globalpensions.com; 23 February 2009).
The €18.7bn Dutch metal workers' pension scheme PME also announced details of its recovery plan.
The fund, which saw its coverage ratio fall from 135% at the end of 2007 to 90% by the end of 2008, said it expected to reach 105% solvency in five years.
It would achieve this through a 1 percentage point increase in contributions, from 22% to 23%, and by not offering indexation on pension payments while the coverage ratio remained below 105%.
Yesterday, the health service retirement system PFZW announced details of its own recovery plan, which would see pension indexation frozen for four years (Globalpensions.com; 30 March 2009)
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