The Dutch Central Bank (DNB) was wrong to force the SPVG pension scheme (Pensioenfonds van de Vereenigde Glasfabrieken) to sell off its gold and has to compensate the scheme for its loss, the court decided today.

In January 2011 the bank ordered the scheme to sell off 10% off its 13% gold allocation, claiming it wasn't in line with the prudent person rule.

The court's ruling stated that DNB didn't convince the court of why the 13% allocation wasn't adhering to the prudent person rule but the 3% allocation was. It will now reopen the investigation to decide upon a compensation for the scheme.

According to SPVG chairman Rob Daamen the loss incurred by the forced sale adds up to roughly 11 million Euros.

SPVG, a Dutch pension scheme with just over 1100 members, first bought the gold in 2008 and since then the price had gone up. It was told of the decision by DNB to sell when it submitted its recovery plan to DNB in 2010.

Daamen told Pension Funds Online at the time he found the decision "weird" and questioned why it took the bank so long to notice the scheme's holding in bullion.

DNB claimed that investment of such amounts in gold is too risky; the price of gold fluctuates too much for it to be classified as an investment and that it does not share the risk analysis of the pension scheme.

"It is weird how the bank was not there to tell us our investment was wrong when we made it in 2008," Daamen said.

When the scheme opposed the sale the governing body decided to go to court, which found in favour of DNB in February 2011, now a second ruling has overturned that decision.

The World Gold Council (WGC) at the time also said to be concerned about the decision by DNB. According to George Milling-Stanley, managing director of government affairs at the WGC, said the decision of the Dutch central bank was at odds with the trends that were at force.

DNB says it is now looking into an appeal against the decision.

First published 16.03.2012

azeevalkink@wilmington.co.uk