DutchNews.nl - Government takes steps to ease pain for pension funds

Pension funds are to be allowed to spread any reductions in payouts over more years in an effort to reduce the pain for pensioners, the social affairs ministry said on Monday.

And pensions funds which are failing to meet government targets will be given ‘breathing space’ in 2013, meaning they will not have to increase premiums immediately even if they break coverage ratio rules.

In addition the central bank is to change the way interest rates are calculated. This means they will be less sensitive to financial market shifts, acting social affairs minister Paul de Krom said in a briefing to MPs.

Earlier this year, it emerged 103 of the country’s pension funds would have to cut payouts by an average 2.3% next year.

But the new rules mean 22 funds will escape having to take drastic measures, the NRC reported.

Dutch pension funds have been hit by low interest rates, which have forced their coverage ratios well below the required 105%. This means technically they do not have enough assets to cover all their pension obligations.

‘These measures make the pension system more manageable and balanced,’ De Krom said. ‘This will contribute to the trust we need across the generations to maintain a collective pension system, for future generations as well.’

Pension funds reacted with disappointment to the plans. The giant civil service fund ABP said there are positive elements but the government should do more to dampen the effect of the unease on the financial markets.

ABP said earlier it will cut pensions next year and a spokesman told website nu.nl a further cut may be necessary in 2014.

Pension fund federation Pensioenfederatie said the minister had missed an opportunity.

Readers' Comments

Although I am not far from retirement myself, I am completely against this. We must stop coddling and 'giving extra breaks and extra time' to banks, pension funds and also to countries that cannot operate their own finances in a sustainable manner. This is NOT school folks! As long as these people and institutions are allowed to continue to be irresponsible regarding taking foolish risks with OUR money (not their money) and not keeping enough collateral cash on hand, this nonsense will simply continue, over and over and over again.

By Bill | 24 September 2012 1:17 PM

The problem is that governments have reduced interest rates and stipulated where funds should be invested. This means pension funds are affected by things beyond their control.

By David Stevenson | 24 September 2012 4:00 PM

Ease pain : change from austerity policies.

By Philippe | 24 September 2012 4:35 PM

Bill: Actually it is 'school' with a lifelong learning experience of how real-world corruption works controlling honest people's lives.

By Jan | 24 September 2012 5:11 PM

@Bill: the problems is how do you conciliate what you are (rightly) saying with the need to ensure that the most vulnerable in our society (those who live from a fixed income and cannot afford to do double jobs, such as the elderly who have worked all their lives and now must live on their pension) do not pay the price?

By the_expat | 24 September 2012 6:03 PM

Pension ponzi car crash in slow motion. Interest rates are set by Central banks and Pension funds should be well aware that these can go down as well as up. There are plenty of economic indicators to help gauge the current and future economic climate. Interest rates are being held low for a reason. It's your pension or your house. Aaaand it's gone.

By Dr Ponzi | 25 September 2012 1:31 PM