Pension fund buffers shrink on credit crisis

One in five Dutch pension funds do not currently have a financial buffer which meets central bank requirements, the Financieele Dagblad reported on Wednesday.

The paper quotes figures from pension consultancy Mercer which monitors Dutch fund coverage ratios. It does not cover major funds such as APB and PGGM.
Most funds are required to have a coverage ratio of between 120% and 130%, meaning they have enough cash to cover pension obligations plus a surplus of up to 30%.
Mercer says that last Friday, 22% of the funds it followed were below the 120% target.
A spokesman for the corporate pension fund association admitted to the paper that low share prices were ‘hurting’, but said fund reserves were deep enough to tide them over. A too-low ratio can lead to an increase in pension premiums or changes to pay-outs.
Pension funds last had to top up their reserves in 2002 when the internet bubble burst.

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