Pension fund interest rate cut ‘incomprehensible’ say funds

Piggy bank with eurosThe Dutch central bank’s decision to change the way in which key interest rates for pension funds are calculated will lead to an average drop in coverage ratios of 3.5%, according to calculations by pension advice group Aon Hewitt.

Dutch pension funds should have a coverage ratio of at least 105%, meaning they have €105 for every €100 they need to pay out in pensions.

The giant civil service pension fund ABP has already said the change will cut its coverage ratio from 103.9% to 102% and the two big engineering funds PMT and PME report similar drops.

The change makes it likely more funds will have to freeze or cut pension payouts and some may be forced into special measures by the central bank itself.

Banks and pension funds say the central bank cut is ‘incomprehensible’ and ‘will hit workers and pensioners in their pockets’.

‘The central bank is forcing premiums up which goes against the strategy to boost spending power,’ said Gerard Riemen of the pension fund federation in the Telegraaf. ‘We don’t understand it at all.’

Thank you for donating to

We could not provide the Dutch News service, and keep it free of charge, without the generous support of our readers. Your donations allow us to report on issues you tell us matter, and provide you with a summary of the most important Dutch news each day.

Make a donation