Engineering pension funds announce savage pay-out cuts

Retired engineering workers are facing cuts in their corporate pensions of over 5% from April 1, it emerged on Friday.

Members of the PMT engineering and technical workers fund will see their pensions cut by 6.3%, while the PME electrical engineering fund is slashing pay-outs by 5.1%.

The cuts are necessary in an effort to boost the funds’ assets, which have been hit by falling interest rates and share prices.

PMT director Guus Wolters said the cut is ‘extremely painful’, while the PME fund said it a statement it is aware of the ‘enormous impact’ this will have on pensioners.

Obligations

By law, pension funds are supposed to have assets equal to 105% of their pension obligations, but both engineering funds now have a coverage ration below 95%.

There is good news for former health service workers. Their pension fund PFZW has managed to boost its assets to over 101%, heading off the need for cuts.

The country’s biggest pension fund, the civil service giant ABP, is cutting pay-outs by 0.5% and may add a further cut next year if its coverage ratio does not recover sufficiently.

For an average pension of €700 a month, this means a reduction of €3.50, the fund said.

More to come

The Dutch central bank said two weeks ago around 75 Dutch corporate pension funds will have to reduce pay-outs this year, and 40 of them will have to make a further cut in 2014.

The cuts will affect some 5.6 million pensions, including 1.1 million people who have already retired. There is some duplication in this, because some people have paid into several pension funds over their career history.

The average cut will be around 1.9%, the central bank said in its statement.

The number of funds being forced to cut pay-outs is down slightly on September’s estimate. Then the central bank said 81 funds would be affected. A year ago, the figure was put at 103.


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