IPE: Dutch Cabinet unveils proposals for new financial assessment framework

15 July 2013

Dutch pensions funds are facing a new financial assessment framework (FTK) for both their existing nominal pension contracts and new contracts under real terms, according to proposals released by the Cabinet.

Under the new FTK, a pension fund's coverage ratio will be the most important criterion of measurement. The level of funding will be the average of the forward curve of the previous 12 months, discounted against the "stable and realistic" ultimate forward rate (UFR), to prevent funding volatility, the Cabinet confirmed. It also stressed that social partners and pension funds would need to clarify in advance how they would spread financial risk across the generation

In the proposals, the Cabinet said it would allow pension funds that prefer their nominal pensions contract to use the same option for spreading financial shocks over three to 10 years, as under the proposed real pensions contract. However, the government also said it would leave the decision of whether to merge existing pension rights into a new real contract to the social partners and the pension funds, adding that the new FTK provided rules for a "meticulous" merger process. The Cabinet made clear that pension contributions would increase with the new rules, in order to improve the pension system's stability.

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