Implementation of new regulatory rules in a multistage ALM model for Dutch pension funds

This paper discusses the implementation of new regulatory rules in a multistage recourse ALM model for Dutch pension funds. The new regulatory rules, which are called the ‘Financieel Toetsingskader’, are effective as of January 2007 and have deep impact on the issues of valuation of liabilities, solvency, contribution rate, and indexation. Multistage recourse models have proved to be valuable for pension fund ALM. The ability to include the new regulatory rules would increase the practical value of these models.