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Trend Towards DC Likely to Continue for Dutch Plan Sponsors

19 July 2012 (PLANSPONSOREurope.com) - The trend towards defined contribution replacing defined benefit plans and paying down pension deficits is likely to continue as Dutch pension funds wrestle with the impact of low interest rates on DB liabilities.

The DutchNews.nl reports the country’s biggest pension funds, including civil service fund ABP and healthcare sector fund PFZW, will “very probably” have to cut payouts next year because of reduced financial buffers.
Meanwhile engineering funds, PME and PMT, have coverage ratios of 88% and 85% respectively and have said pension cuts of up to 7% are “more or less definite”.

Elsewhere their site reports the NOS monitors the coverage ratio of over 100 pension funds and says only eight are now above the legal 105%. Unilever’s corporate fund has the highest financial buffers with a coverage ratio of 121%.

Jeroen Koopmans, Partner at pensions consultancy LCP, told PLANSPONSOR Europe: “Corporate pension funds on average tend to have materially higher coverage ratios than the industry wide pension funds.

“Some of those pension funds have a very strong sponsor that agreed to pay additional amounts if the pension fund is in deficit.

“Looking at Shell they have already announced that for all new employees they will introduce a defined contribution plan instead of the final pay plan for the current employees. Also ING has announced that it has changed the pension plan.

“Perhaps corporate pension funds are performing better because they seem more risk averse than industry wide pension funds, which is probably due to more direct involvement of the sponsor who is strongly represented in the board of the pension funds. The trend to DC will continue.”

PLANSPONSOREurope Staff
editors@plansponsoreurope.com





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