Big pension funds see assets slide, pension cuts loom for one million

Four of the country’s biggest pension funds have lost so much money in the current crisis that they are breaking central bank rules on how much they should have in assets, it emerged on Thursday.


The coverage ratio of civil service pension fund ABP, one of the biggest pension funds in the world, has fallen back to 90%. Under central bank rules the ratio should be 105%, meaning its assets should cover at least 105% of its obligations.
Health service pension fund Zorg en Welzijn and two engineering funds – PME and PMT – are also well below the legal limit.
Cuts
The shortfalls mean the funds will all have to take steps to improve their financial position, but cuts in pensions are very likely.
In fact, at least 100 Dutch pension funds will have to cut payouts in 2013 if they do not improve their financial position quickly, according to the head of the sector’s umbrella group in the Financieele Dagblad.
The cuts, which will affect over one million people, will average 3% but could be as much as 15%, Gerard Rieman, director of the Pensioenfederatie is quoted as saying. He bases his claims on the latest figures held by the central bank.
‘The bill has to be paid now,’ Rieman told the paper.
Targets
On Wednesday, the central bank said pension funds which had fallen below the 105% limit would not have to put up premiums immediately. Instead they would be given a year to come up with a recovery plan.
This is because a sharp rise in premiums would not be beneficial to the economy, the bank said.
However, pension funds which were given more time to get their finances in order in 2009 would not get a further extension, the bank said.

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