Interest rate change may spare Dutch pension funds

Dutch media today suggest that pension funds in the country may benefit from a rule change pending from the government that would affect the way interest rates, and hence future liabilities, are calculated.

With reference to Financieele Dagblad, it is reported in that social affairs minister Henk Kamp has acknowledged the interest rates used to calculate insurance company buffers may also be applied to pendion funds by the end of 2012.

Allowing higher interest rates to be used to calculate future liabilities means funds would require less buffer capital currently. Coverage ratios would be boosted immediately.

The change is expected to form part of the package of new pension rules being introduced by the minister through the country’s Budget in September. Millions of Dutch long term savers would be affected through the likes of Stichting Pensioenfonds ABP. This pension fund for employees in the government, public and education sectors alone counts some 2.8 million beneficiaries.

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