NETHERLANDS - A private mutual insurance scheme under which pension funds would enjoy a shared bail out system would be far superior to the proposed FTK (Financieel Toetsingskader) regulations which threaten to undermine the Dutch economy, the authors of a damning new research paper have argued.
“The True Cost of the FTK”, published by SEI Investments Europe in conjunction with Con Keating, principal at The Finance Development Centre, claims the FTK could not only “destroy the credibility of the Dutch [pension] system” but also effect the overall economy.
The introduction of the FTK, under which pension funds will need to be 105% funded 97.5% of the time, has been delayed until 2007.
Bart Heenk, managing director of SEI Netherlands, said a private mutual insurance scheme along the lines of that being examined by the Dutch corporate pension fund association, the OPF, was a “very good idea”.
The OPF is to undertake a feasibility study this year to assess the viability of setting up a national pension fund for company schemes to improve economies of scale.
“Led by movements by policy makers in other countries using in-vogue economic theory, the DNB (De Nederlandsche Bank) has designed legislation which does not fit the purpose of assisting pension funds,” Heenk said.
“The FTK has a cost which will emerge as a drag on Dutch productivity. The irony is that the solution to the ‘pension problem’, be it in the Netherlands or any other developed country, is to be found in part in future productivity growth. It is a classic case of the treatment exacerbating the problem.”
Keating called for “fundamental revisions” to the FTK, claiming policy alternatives were not examined by the DNB.
He said: “The problem is that the supervisor has the control rights with respect to the scheme, that’s what introduces a dead weight cost. It would be much better to arrive at a situation where the supervisor collects the information, making it public and allowing the beneficiaries who are party to the pension obligations to set the rules in conjunction with the employers. The DNB could act as the court of arbitration.”
The paper argues banking supervision, on which the FTK’s risk-based theory is based, is not appropriate for pension funds as their time horizon and demand for liquidity are totally different to a bank.
By Kristen Paech
Hyperbolic discounting and political temptation: Why Brexit-fuelled AE reversal would be a 'monumental' mistake
The home secretary has suggested AE should be scrapped in the event of a no-deal Brexit. Darren Philp explains why this would be misguided
The trustees of the Kodak Pension Plan No.2 (KPP2) have said it will likely enter the Pension Protection Fund (PPF) in "due course" after reviewing the scheme's investment in Kodak Alaris.
A US company has completed a £285m pensioner bulk annuity for around 1,100 of UK members with Legal & General (L&G).
Former BHS chief Dominic Chappell has been accused of trying to rewrite history as he seeks to overturn a conviction for failing to hand over information to the regulator.