Low interest rates hit big Dutch pension funds yet again

Four of the five big Dutch pension funds do not have enough money to meet government requirements, the funds themselves said on Friday.

Pension funds are required to have a coverage ratio of over 104%, meaning their assets slightly outstrip their pension obligations.

Construction workers’ pension fund Bpfbouw, with 800,000 members, is the only one of the big five to beat the limit. The fund has a coverage ratio of 114.5%, an increase of 0.7 percentage point on three months ago.

The giant civil service fund ABP, which is one of the biggest pension funds in the world, saw its coverage ratio slip slightly to 101.1% over the past three months.

The fund covers 2.8 million people. ‘ABP assets rose by over €9bn in the last quarter but the coverage ratio has gone down because of falling interest rates,’ deputy chairman Cees de Veer is quoted as saying by website nu.nl.

Interest rates

Pension funds’ obligations are calculated using interest rates, which have been falling steadily for months.

Engineering fund PME, which has 630,000 members, saw its ratio fall to 102.6%. Chairman Franswillem Briët said European central bank policy is making the position of pension funds worse.

‘Keeping interest rates deliberately low is stopping pension funds’ financial recovery,’ he told nu.nl. ‘I can be happy with our annual return of 17.8% yet it is still not enough.’

Health service pension fund PFZW, with two million members, saw its ratio fall from 105% to 102%.

Electrical engineering fund PMT, with around one million members, increased its coverage ratio marginally but at 103% it is still below the required level.