Large pension funds in the Netherlands fear that they will not be able to avoid lowering pensions in the coming years. That say, among others, the civil servants fund ABP and the Pension Fund for Care and Welfare (PFZW) Thursday. Metal funds PME and PMT also fear that a reduction will be realistic after 2021.
Reductions in pension benefits have been prevented for this year. Although the funding ratios of various large funds were too low for a long time, reductions were nevertheless prevented.
Whether they will be able to do that after this year is very much the question. The funds fear that in the years after 2021 they will nevertheless have to reduce their pension benefits due to stricter calculation rules. Unnecessary, according to the ABP, among others. You should only make a reduction if it is economically necessary.
Whether a reduction is necessary depends on the funding ratio of a pension fund. This is the ratio between how much money a fund has in cash and how much is needed to be able to pay out pensions now and in the future.
Coverage at ABP took a dive
Due to the corona crisis, ABP’s funding ratio plunged from 97.8 to 82 percent in the first quarter of 2020. This put the fund in the danger zone, but due to the improving stock markets and stable interest rates in the fourth quarter, the funding ratio rose again to 93.2 percent at the end of last year.
Normally, 104 percent is the limit for a reduction in pensions. Outgoing minister Wouter Koolmees (Social Affairs and Employment) previously decided to temporarily lower that limit to 90 percent due to the corona crisis.
Funding ratios also increased at PFZW, PMT, PME and bouwfonds bpfBOUW in the last quarter. The coverage ratio at PFZW was 92.6 percent, while at both metal funds it rose by 95.4 and 97.2 percent respectively. BpfBOUW was well above the limit, with a coverage ratio of 111.1 percent at the end of the past year.
– .
