A slow and "unacceptable" reaction to the Euro zone crisis is hurting pension schemes' ability to function as long-term investors, says Jac Kragt, a board member at Dutch pension provider PGGM

It has become increasingly difficult for pension schemes to get decent returns on their investments due to the continuing volatility on the financial markets, Kragt told national newspaper De Financiele Telegraaf last Saturday. He warned that there is a serious risk that Dutch pension schemes will get into trouble again.

"The end of the problems that have been instigated by the Euro zone and debt worries are not in sight yet. In fact, if nothing will change relatively quickly, there will be more crises," he told the paper.

According to Kragt, the blame lies with European politicians who are too slow of the mark when it comes to dealing with the financial instability in the Southern European states, behaviour he calls "unacceptable".

Kragt stresses that this is the second time in a short period that pension schemes have been confronted with serious financial difficulties and that this will make it increasingly difficult for them to function in their role as long term investors. "Under normal circumstances schemes have a chance to recover, but you can not do that when there is a double dip occuring."

Last month it became apparent that more Dutch pension schemes had negative returns and that their funding levels had dropped dramatically. 

Pension funds in the Netherlands need to have a minimum coverage ratio of 105%. According to Aon Hewitt's Pensions Thermometer currently the average funding levels for schemes have dropped by almost 15 percentage points since the end of the first quarter to 100% at the end of August.

PGGM is the pension provider of five schemes, amongst which is PFZW, the country's second biggest pension scheme. PGGM invests more than €105bn of pension assets.

First published 05.09.2011

azeevalkink@wilmington.co.uk