NETHERLANDS - ABP has reported a 28 percentage point drop in its coverage ratio, from 118% to 90%, since the end of the third quarter of 2008.
It said that, over the last two months of 2008, the falling interest rate was almost entirely responsible for the decreased coverage ratio.
But it noted the payment of pensions was not in danger
ABP said, as its coverage ratio is now lower than 105%, there is a situation of underfunding and it is obliged to submit a recovery plan to De Nederlandsche Bank by 31 March at the latest.
It said the aim of this plan would be to ensure the fund has eliminated the situation of underfunding within three years and that the value of the assets is on the level
specified by the Pensions Act within a period of 15 years.
ABP said it would continue to work on the basis of its long-term investment approach for this recovery plan.
ABP chairman of the board Elco Brinkman explained: "Just like other pension funds, ABP has suffered greatly from the consequences of the financial crisis.
"This crisis, which evolved very rapidly in the last few months of 2008, is the worst ever in ABP's history. In the last quarter of 2008, the fund lost approximately €22bn of the almost €80bn ABP had made with investments after the dot-com crisis between 2003 and 2008."
He added: "Our focus over the coming months will be on recovering the fund's financial position."
In December 2008, the ABP board decided that as per 1 January 2009, it will not be possible to allow pensions to increase with the average development of wages.
The board also decided, in view of the unstable financial markets and the economic circumstances, to see whether a new indexation decision is warranted before 1 July 2009 following the approved recovery plan.
ABP said its investments in equities, real estate and private equity dropped sharply in value in the fourth quarter of last year.
It said the return on commodities was also very negative over the last quarter of 2008 (-47.5%) due to falling oil prices.
But it said fixed income investments had seen growth of around 1% and had largely hedged itself against currency risk, especially dollar risk.
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