It said that calculations suggested that, in order to achieve a funding increase of 10 percentage points, both participants and pensioners would lose 6% of purchasing power, and concluded that younger participants may never reap the benefits of the new rules.In its opinion, it was impossible to set up a fully balanced intergenerational policy through legal means, and that therefore the task should be left to employers and workers as well as pension funds’ boards and internal bodies.As a safety valve, the government should merely require that indexation is only possible if a pension fund’s coverage exceeded 110%, it said. The federation also noted that enabling supervisor De Nederlandsche Bank (DNB) to issue additional conditions for recovery plans or the smoothing of financial shocks could hamper funds’ abilty to implement policy while pursuing their long term pension target. It indicated that pension funds should be allowed to address this issue through a feasibility check of financial consistency of their long term policy.The lobbying organisation further stressed it was worried the FTK proposals would lead to further responsibilities being handed to DNB, for example by allowing it to enforce a different asset allocation than the one a pension fund deemed suitable for its contract arrangements.It feared that in the future, the supervisor, rather than a pension fund’s social partners, could decide on crucial contract elements, such as the smoothing period for financial setbacks or windfalls, investment policy and risk attitude.The lobbying organisation said it had serious objections against the ultimate forward rate (UFR) for discounting liabilities, as proposed by the specially appointed advisory committee.In its opinion, the suggested UFR was not stable, as it was not market-based and lacked a vision about the rate’s long term equilibrium, adding that it should be aligned with the less strict UFR for Dutch insurers.The federation also warned against a suggested mandatory individual registration for missed indexation and applied rights cuts, as it would cause “high costs, communication problems as well as administrative complexity”. The organisation noted that the FTK proposals did not address issues such as how pension funds should deal with re-insured pension arrangements and value transfers.Earlier, the unions for young workers – VCP Young Professionals, CNV Jongeren and FNV Jong – indicated that they were largely satisfied with the new FTK proposals, “as financial windfalls would be shared, and financial setbacks as well as indexation would be evened out”.The unions were critical of some aspects of the proposal, identifying the risk that pension funds could remain in a recovery phase indefinitely, and could be blocked from adjusting their investment portfolio at crucial moments. They said they also missed a recovery mechanism for longevity shocks in the proposals.The lobbying organisations for the elderly – CSO, NVOG and KNVG – deducted that future occupational pensions could drop by 48%, following the combined effect of the new FTK, the earlier reduction of annual pensions accrual from 2.25% to 1.875% as well as the lack of indexation during the past six years.In a joint statement, they predicted that there would be hardly any indexation during the next 10 to 15 years, and that inflation compensation in arrears would have to be evened out over a long period. In their opinion, the cabinet’s proposals would lead to “overflowing pensions pots and lower achievable pensions”. The Dutch Pensions Federation has severely criticised a number of the cabinet’s proposals for the new financial assessment framework, including the way it wants to improve the intergenerational balance between pension funds participants.In its response to the plans, the lobbying organisation concluded that the proposed new rules for “future proof indexation” – based on a combination of a scheme’s funding, nominal liabilities, expected returns on securities as well as duration of liabilities – would lead to insufficient or too early inflation compensation at individual pension funds. As the new indexation rules were stricter than the current ones, the options for granting indexation would be limited, and indexation in arrears would become impossible, it said.Moreover, as financial setbacks must result in rights cuts immediately, whereas windfalls are awarded as increased benefits only much later, the proposals would also affect the pensions accrual of younger generations, the federation argued.
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