ABN Amro economists are forecasting the state pension (AOW) will go up 8.3% over 2019 and 2020 – which would be the biggest increase since 1998.

In the Netherlands the state pension goes up in line with inflation and with collective sector pay rises, both of which are going through a period of ‘exceptional growth’, the bank said. Changes in taxes and premiums are also having an upward impact.

News of a rise in state pension coincides with new figures from the corporate pension fund sector, where lower interest rates continue to depress fund returns.

Although performance has improved in the past month, the two biggest Dutch funds – the giant civil service fund ABP and the health worker fund PFZW – are both likely to be faced with making cuts next year.

By the end of December, they will be required to have assets equal to 94% of their obligations or reduce payouts. The two big engineering funds, which have been in a worse position for longer, have to boost their coverage ratio to 100% to avoid reducing payments to pensioners.

The Dutch pension system is due to change in 2022 and officials are currently looking at ways to head off the need to make unnecessary cuts.

The new system will reduce the pressure on funds to keep their assets topped up, meaning the funds have two years to bridge before they face more relaxed financial requirements.