The funding ratios of the five largest pension funds rose last quarter, mainly due to higher interest rates. ABP, PME, PFZW, PMT and bpfBOUW are now looking at whether they can increase pensions next year, the funds announced on Thursday.
The funding ratio indicates the minimum amount of money a pension fund must have in cash to be able to meet its obligations now and in the future. ABP, the pension fund for civil servants, saw the coverage ratio rise to 122.7 percent.
“It is no longer possible for most participants to follow. The financial markets are doing poorly, the words recession and crisis are frequently used, and yet the coverage ratio is rising and ABP’s financial position is improving. This has everything to do with the rise in interest rates. Because that means we have to keep less in cash to meet our obligations,” says chairman of the board Harmen van Wijnen.
At the end of this year, ABP will examine whether pensions can be increased in 2023. At the beginning of this month, the civil servants’ fund already increased pensions by 2.39 percent.
PME, the pension fund for people in the metal and technical industry, is switching to indexation of employees’ pensions now that the funding ratio has risen to 112.4 percent. In November, the fund will consider whether pensions can be increased again in 2023.
Pensions can go up with a funding ratio of 105 percent
Pension funds have recently been allowed to increase pensions if they have a policy funding ratio, the average of the current funding ratios over the past twelve months, of 105 percent. Until recently, that was 110 percent.
The coverage ratio of Pensioenfonds Zorg en Welzijn (PFZW) has risen to 113.0 percent. “We sincerely hope that we can increase the pensions again on January 1, 2023. But that is still very uncertain,” says board chairman Joanne Kellermann.
The Pensioenfonds Metaal en Techniek (PMT) has a funding ratio of 109.3 percent. Thanks to the rise in interest rates, PMT was able to announce an indexation of 1.29 percent as of October 1, 2022 at the beginning of this month. “In November, according to the regulations, it will be reviewed again whether indexation is possible as of January 1, 2023,” according to the fund.
The board of bpfBOUW wants to increase pensions for the second time this year. On January 1, the pensions are already indexed by 1.76 percent. The intention is now for a further increase to 2.57 percent as of 1 July. The pension fund for the construction industry saw the funding ratio rise to 137 percent last quarter.
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