Pension funds will have to hike premiums or slash payouts, federation warns


The Dutch pension fund federation has warned that without a steep hike in pension premiums, pensions themselves will have to be cut significantly.

In a position paper drawn up ahead of round table talks with MPs, the federation says it is concerned that premiums will soar if interest rates remain as low as they are now.

‘The situation is extremely serious and threatens the pension system, including the reforms,’ the organisation said. It estimates premiums could rise between 10% and 30%.

The warning came as central bank president Klaas Knot told MPs that he believes interest rates will remain low for some time and that the pension system should be adapted to take this into account.

He says the system should be reformed so that there is less reliance on interest rates, and pension payouts remain constant.

A number of funds have already warned that pension cuts are likely next year, including the giant civil service fund ABP, which is one of the biggest in the world.

Low interest rates mean that funds have to increase employee premiums because premiums alone do not cover the costs.

Unions and employers recently agreed plans to overhaul the Dutch pension fund system, which would reduce the pressure on funds to keep their assets topped up. That new system is due to come into effect in 2022, meaning the funds have two years to bridge before they face more relaxed financial requirements.

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