Big pension funds keep quiet about raising payouts this year


The financial position of the biggest Dutch pension funds is improving but it is still unclear if they will put up payments at the end of this year as hoped, news website said on Thursday.

Some funds already put up pensions by as much as 10% at the start of this year because of their improved position, but it will be the autumn before they decide if payments can increase again.

The funds must have a coverage ratio of 105% to increase pensions, which means their assets should outstrip their obligations. The five big funds are all well above this but have not yet commented on the prospects for a rise.

Civil service pension fund ABP, which is one of the biggest funds in the world, currently has a coverage ratio of 113.6%. But the fund’s chief economist Thijs Knaap made no mention of a potential pension rise in his quarterly update on Thursday.

This, said, is down to the introduction of the new pension system, which has considerable consequences for funds and may be encouraging funds to boost their reserves rather than top-up pensions.

The aim of the new legislation, first mooted 16 years ago, is to make corporate pensions more sustainable. When the scheme comes into effect in 2027, workers with a company pension scheme will no longer know in advance how much pension they get.

Instead, pensions will vary in line with investment returns and life expectancy, meaning the economy will have more of an influence on payouts. The
aim of the reform, the government says, is to spread the burden of paying for
pensions more fairly across the generations.

Corporate pensions will no longer be on based average (wage-related) contributions but on everyone paying the same.

The Dutch pension system is currently based on three pillars – the state pension AOW, compulsory corporate pension schemes – either sector-wide or company-based – and individual or private pension schemes.

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