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
Some of the UK's biggest pension schemes will be forced to report on climate risk in line with recommendations from the Taskforce for Climate-related Financial Disclosures (TCFD).
TPT Retirement Solutions has launched a pension scheme for the education sector which offers schools both defined contribution (DC) and defined benefit (DB) pension provision.
The People's Pension has revealed plans to overhaul its charging structure, cutting fees and returning profits to members with an aim to help people save more money for retirement.
Data consultancy ITM has appointed Akash Rooprai as head of client management to lead its de-risking business.