Strengths and weaknesses of the Dutch standardized approach to measure solvency risk for pension plans

Measurement and management of the solvency of the pension plan is one of the key responsibilities of the trustees of a plan. If the sponsor does not underwrite the liabilities of the fund (as is the case in the Netherlands), solvency of the fund itself will also be a major concern for the regulator as well as for the participants in the plan, unless continuity of the fund is assured and all risks can be shifted to future generations. If the sponsor is liable for deficits in the pension fund, as is usually the case in the US and the UK, the strength of the sponsor is relevant as well to judge whether the pension obligations can be met 2 . The solvency of the fund itself is in these cases nevertheless also of prime importance because it can be an important determinant of the solvency of the sponsor and because fluctuations in the solvency of the fund are to be reported in the financial statements of the sponsor under the new International Financial Reporting Standards.