NETHERLANDS - The solvency crisis among Dutch funds is the most severe in the industry's history, pension experts and industry commentators warn.
"Things are really at a crossroads right now - low coverage ratios mean problems," van Dijk said.
Under Dutch law, when a pension fund's coverage ratio falls below a minimum of 105% it is required to file a recovery plan to the Dutch central bank and pensions regulator, De Nederlandsche Bank (DNB), to show how the fund will close the gap over a 3-year period and return to 'full' solvency of between 125-130% within 15 years.
Many were concerned about the likelihood of funds being forced to cut benefits payments as one way to reduce the shortfalls.
John Smolenaers, senior consultant with Watson Wyatt added: "There are lots of pension funds with coverage ratios well below 100%. With coverage ratios of 80-90%, it's realistic to expect that payments will be cut.
"If one pension scheme did that, it would be bad for members, but really, [about 25% of schemes] need to cut back and then it becomes a macro-economic issue."
Leonique van Houwelingen, senior vice president and head of continental Europe relationship management with BNY Mellon Asset Servicing added: "This is the most severe situation - we've never seen such big plans fall below the coverage ratios."
She added that unlike the dotcom crash of 2002-3, where the impact was confined largely to equities, the current downturn was "an industry wide problem, across all instruments".
At end of November, Royal Dutch Shell become one of the highest profile pension funds to be hit with a ratio declining to 85% (Globalpensions.com; 12 December 2008), while industry giants ABP and PFZW have also been forced to submit recovery plans.
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