Rising interest rates boost pension funds despite market losses

Pensioners on a bench
Photo: Depositphotos.com
Pensioners on a bench
Photo: Depositphotos.com

The five biggest Dutch pension funds are in better shape, as rising interest rates offset financial market losses, and that means pension increases could be on the cards again next year.

The government is putting up the state pension by 10% in 2023, and all the big five are on target to be able to at least partially put up company pensions in line with inflation.

Civil service pension fund APB, one of the biggest funds in the world, has had a average coverage ratio of 116% over the past 12 months, and that is well above the 105% lowest level for index linking.

The coverage ratio shows if a fund has enough assets to meet its pension obligations.

Healthcare pension fund Zorg en Welzijn, construction sector fund BfpBouw and the two engineering funds PME and PMT also beat the 105% limit.

However, the Financieele Dagblad points out that all five funds have made considerable losses on their investments this year – even bigger than during the financial crisis earlier this century.

‘In fact it is very odd,’ actuary Marc Heemskerk told the paper. ‘Pension funds are losing billions but we are all cheering because the coverage ratios are going up.’

The funds will decide next month whether or not to put up pensions in 2023.

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