NETHERLANDS - Five Dutch pension funds have teamed up to explain their funding plight to their members and pointed a finger at the impact of low interest rates.
In a notice released today, Stichting Pensioenfonds ABP, Pensioenfonds Zorg en Welzijn (PFZW), bpfBOUW (bpf), Pensioenfonds Metaal en Techniek (PMT) and Pensioenfonds van de Metalektro (PME) explained how historically low interest rates were hampering solvency ratios.
ABP spokesman Thijs Steger said, "Investment results have been very good lately. It's not about investment results at all. It's the way the liabilities are discounted."
"We are all in the same position," he added. "Every month we make our funding ratio public and a lot of participants are getting worried about (their) pensions."
As a result, pensioners have generally seen a freeze in pension indexation, while employees have seen an increase in their premiums.
"Everyone feels it," said Steger.
ABP reported a funding level of 88% at the end of August; PFZW, 94%; PMT, 85.2%; bpf, 97.1% and PME, 91%.
Dutch pension regulations require schemes to be 105% funded. To get back to full funding, pension funds can either freeze the level of pension payments, increase the premiums paid by employees or cut benefits. Steger said cutting benefits is always considered a last resort.
He said ABP's recovery plan to getting back to full funding requires the pension fund to be 96% funded at the end of the year. "At the beginning of 2011, the board of trustees will decide which measures are necessary."
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Royal Bank of Scotland (RBS) faces a £102m impact on liabilities as a result of equalising guaranteed minimum pensions (GMPs), according to its annual results.
Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point