The two largest pension funds ABP and Pension Fund Zorg en Welfare do not have to cut pensions by 2022. This will not reduce the pensions of millions of Dutch people for the time being.
ABP‘s coverage ratio was 92% at the end of December. Pension Fund Zorg en Welfare has a funding ratio of over 91 percent and this means that the funds, with the heels over the ditch, do not have to cut. Pensioenfonds Metaal Techniek is slightly better and has a coverage ratio of 95.3 percent.
The coverage ratios are an estimate for the time being. The final coverage ratio will be announced at the end of January.
The pension funds have been in heavy weather for years. Low interest rates and coronacrisis have made it difficult for many funds to maintain finances. Minister of Social Affairs therefore makes an exception, he already announced: the coverage ratio should be 90 percent by 31 December 2020, instead of 100 percent. ABP complies with that.
The pension fund for cleaners and window washers is all about tensioning. At the end of November, the coverage ratio stood at 88.8%. According to the fund, if there is a need to be cut, it will be a few euros per month.
Still high risk
It is expected that more large pension funds will not have to cut. But that does not mean that the problems are gone, experts say to DeccEit.
“ If you are not short now, there is still a chance that it will have to happen in the coming years,” says Marieke Knoef, Professor of Pension and Economics at Leiden University. “Funds with a coverage ratio between 90 and 95 percent are at great risk,” says Frank Driessen of pension advisor Aon.
Account for the workers
According to Knoef, choosing between two evils. “Not shortening is relatively beneficial for the elderly and people sitting just before retirement. On the other hand, you don’t know what the future will bring us. The return may be lower in the future than we were used to. Young people need it very much, of course we need to think about that too.”
Driessen points out that by not shortening the problems are pushed further forward. “You have more burdens than what is in the pot, and this is not solved by the premiums that are levied.” The bill is presented to the workers, he concludes.
By 2026, pension funds must have a minimum funding ratio of 95 percent. The two largest pension funds are still under that. It will depend on economic developments or will not have to cut pension funds later.