Higher pension premiums, but lower pensions

Employers and workers have seen their pension premiums rise by 16% since 2008, while building up smaller pension pots.

The main reason for the discrepancy is the coverage ratio problem at the pension funds, reports the Financieele Dagblad following research into 50 of the biggest funds.

In 2008, the average pension premium was 21% of salary but this has now reached 25%. The premium at the civil service union ABP, the country’s biggest, currently stands at 25.4%, the highest in 40 years, says the FD.

However, the amount actually being built up for a pension has fallen from 2.09% in 2008 to 1.87% in 2013.

Essential

According to the building sector pension fund bpfBouw raising the premium and lowering the amount of the pension was essential to avoid the premium becoming too high.

Health service pension fund Zorg en Welzijn told the FD the changes were made with an eye on people working until the age of 67.

CEO Peter Borgdorff admitted to the paper that raising the premium had a greater effect on workers than on pensioners. Referring to coverage ratios which remain below the 105% minimum, he said restoring these with higher premiums meant employers were also contributing. ‘Pensioners are playing their part because pensions are no longer index-linked.’

The difference between premiums and pensions is currently the subject of heated debate, with the government aiming to reduce the amount workers can put tax free into corporate pension schemes from 2.25% of their gross salary to 1.85%.

 

 

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