NETHERLANDS - The average funding level of Dutch pension funds has reached 100% due to recent rallies in the international financial markets, data by Mercer Netherlands reveal.
Mercer principal Dennis van Ek said: "The improvement is due to the recovery in the financial markets, which saw most stock market up by some percentage points lately."
In addition, van Ek said bond yields, which are used to discount pension fund liabilities, have increased by 30 basis points since the beginning of the year. This further contributed to the improvement of the average funding level, which improved two percentage points in May alone, he said.
According to national law, Dutch plans are obliged to present a recovery plan to the DNB when their finding level drops below 105%. In February the Dutch Ministry for Social Affairs granted two extra years to troubled schemes, extending the recovery period from three to five years (Globalpensions.com: 23/02/09).
Van Ek said: "Three hundred and fifty of over 650 schemes had to present a recovery plan to the DNB by the beginning of April. The data show funding level has increased for the majority of funds and that many funds are actually ahead of their recovery plans.
"The drastic measure of lowering nominal pensions, which had been discussed in the past and which was likely to occur by 2012 anyway, is now farther away than before."
The DNB is now in the process of reviewing the recovery plans filed by Dutch under funded schemes. A spokesperson for DNB said the process would end on 1 July. He declined to comment on the ongoing review.
The Dutch Association of Industry-Wide Pension Funds (VB) spokesperson Gert Kloosterboer said: "The recovery plans were based on the financial situation of pension scheme at 1 January 2009. The situation has undoubtedly improved because of the recent financial markets development."
However, he added: "Data with which the plans have to work can vary on a daily basis at the moment. Therefore, even if the situation has improved, it does not affect the way plans are working towards the recovery."
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