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NOS news•today, 5:46 p.m
The five largest pension funds in the Netherlands are not generous with increases in pensions on January 1. The last of the largest pension funds, ABP, the pension fund for government and education, announces how the benefits will increase. At ABP, with more than 3 million employees and retirees, next year there will be an increase of 1.84 percent.
The increase is below the current rate of inflation. In October of this year, daily life was 3.5 percent more expensive than in October 2023. Index, the increase in pensions to compensate for rising costs, is therefore behind the price increase.
ABP happy with the increase
The falling interest rate is the main reason why ABP limits indexation. In the current pension system, pension funds have to keep more money in cash when interest rates fall. This means that pension benefits cannot increase as much.
The chairman of ABP, Harmen van Wijnen, says he is ‘delighted’ with the increase, as only half of the increase costs for pensioners is being compensated. “This is what we can do with the financial situation. We would prefer to take into account all the price inflation, but you have to make a fair assessment of what is and what is not possible.”
The chairman emphasizes that the fund’s desire is to maintain a pension with purchasing power for all participants. “Sufficient capital must be in hand to make a healthy transition to the new pension system.”
The various pension funds must be switched to it by 2028 at the latest new pension system. During the transition, the general pension pot is divided into personal pension pots for the participants. In addition, the amount in that pot will depend on the development of the financial markets. This move will affect the decision to what extent pensions are increased.
Coverage ratio went up
For example, the Zorg&Welzijn Pension Fund (PFZW), the largest after ABP, does nothing more for retirees. The health pension fund is mainly keeping a close eye on its money as it wants to move to a new pension system in 2026. According to the chairman of that fund, it is important to have a “healthy financial position” that date.
This is why PFZW wants to try to increase the coverage ratio next year. The higher the coverage ratio, the better able a pension fund is to meet all pension obligations. “We want to ensure that everyone who receives or receives a pension with PFZW receives at least the same high pension. “
In recent years, the pension benefit of ABP has increased, such as a compensation of almost 12 percent due to high inflation as of January 1, 2023. But until 2022, ABP and large pension funds had a zero line for years another. This means that pensions have not been increased. In those years, a coverage ratio that was too low also affected pension funds.
2024-11-28 16:46:00
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What measures are being taken by pension funds like PFZW to mitigate the risks associated with the new system’s reliance on fluctuating financial markets?
This Dutch news article discusses the financial health and transition plans for the Dutch pension system. Here’s a breakdown of the key points:
* **Future of Pension Funds:**
* The chairman emphasizes the importance of maintaining purchasing power for all pension recipients during the transition to the new pension system.
* Sufficient funds are crucial for a smooth and successful transition.
* **Changes to Pension System:**
* The shift to a new pension system is mandatory for all pension funds by 2028.
* **Impact of Transition on Pensions:**
* The general pension pot will be converted into individual pots for each participant.
* The value of these pots will fluctuate based on financial market performance.
* Pension increases will be directly affected by these market developments.
* **Coverage Ratio Increase:**
* The article mentions PFZW, the second-largest pension fund, and implies it’s already taking measures to improve its financial health, possibly resulting in no further cuts for retirees.
**Potential Concerns:**
* The article highlights the uncertainty associated with the transition to the new system.
* Reliance on financial markets to determine pension values introduces risk and potential for fluctuations.
**Overall:**
The article provides a snapshot of the ongoing changes in the Dutch pension system. While the goal is to create a sustainable and fair system for everyone, the transition involves complex challenges and uncertainties for both pension funds and individuals.
