Inflation hedging: How the Dutch pension sector is moving its focus from nominal to real liabilities

The Dutch pension sector has long-held a focus on nominal liabilities but both schemes and regulators are investigating whether a move to assessing real liabilities would be a step forward.

The Financieel Toetsingskader (FTK) regime, introduced in 2006, created a risk-based solvency regime for Dutch pension funds and cemented the Netherlands’ position as a world leader in pension risk management. After an in-depth series of discussions the Dutch Central Bank (DNB) opted to enforce a purely nominal approach to solvency that reflected the use of conditional indexation – only granting inflation-linked pension increases if the scheme is sufficiently well funded – by Dutch schemes.

This