The Dutch government has exempted corporate pension funds from new International Financial Reporting Standards. In an unexpected move, the Dutch minister of Justice, Piet Hein Donner, has decided that financial institutions that are not traded on the stock exchange, are to be exempted from IFRS rules.
This proposal represents a 180-degree change of the policy put in place by finance minister Gerrit Zalm in 2000. Zalm had wanted all financial institutions to implement IFRS in 2005. Financial institutions and pension funds will now not have to comply to IFRS rules, according to Egbert Eeftink, partner at accounting firm KPMG.
Jeroen Steenvoorden, director of the OPF, the Dutch Association of Company Pension Funds, told IPE that the new ruling would not have a large impact on the overall performance and operations of the pension funds. He said that the most likely real impact would be that the total administrative workload would be less than expected and that funds would have a little bit more leeway in the short term.
In the longer term, however, all still needs to be seen. In the view of the OPF, which is backed by Peter Borgdorff, director of the Dutch Association of Industry-wide Pension Funds, the VB, Donner’s proposal will mean no real changes. In relation to the overall membership of both associations, most pension funds have not even implemented the standards.
Dirk Witteveen, chairman of the Pensions and Insurance Supervisory Authority, or PVK, said the ministers of justice and finance had formerly taken the view that it was in the best interest of the business community to broaden the introduction of IFRS for listed companies to all medium-sized and bigger companies in the Netherlands.
“However, we noticed that we were the only country in Europe considering doing that! I guess that the idea is that we are still in favour of broadening this to larger and medium sized companies, but the reality shows that no one else in Europe is doing this. It’s a fair point that this will be difficult still for some parts of industry and for pension funds as they still need to be clear what their market value is.”
Witteveen added that the debate on accounting standards for pension funds had strong arguments on both sides. “The pension sector has a point on this issue because it started before the 1940s by stating that pension funds in the Netherlands should be independent. So it [the pension fund] is a separate legal entity and we forbid pension funds to have more than five percent invested in their sponsors, for example.”
“That should always be taken into account. On the other hand the accountancy sector has a point as well in the way that we have tripartite contracts between the employer, unions and the pension fund for the funding of pensions. Many of those contracts are formulated in a way that if I was an accountant I would say that there was a certain liability [for the sponsor]. I would say that if pension funds continue in this way they should redraft the contracts, because transparency would help here.”
Witteveen said it might be the case that pension funds inform members that any shortfalls could result in a drop in pension rights, not a capital injection by the sponsor.