The five big Dutch pension funds have sufficient funds to put pensions up in January but this is far from certain, according to their quarterly updates.
All five funds, which have eight million members and pensioners between them, have a coverage ratio of well above 105%, which would allow them to increase payouts. However, economic uncertainties and the government’s plans to reform the pension system are having an impact, the funds say.
The increase in the coverage ratio is largely due to rising interest rates. In the last three months, the five big funds have seen their investments go down in value by between 3% and 5%.
“Our actual coverage ratio has gone up sharply,” said Harmen van Wijnen, who chairs the civil service fund ABP, which is one of the biggest in the world.
“But it remains to be seen if that continues, given the terrible conflict in the Middle East and the continuing war in Ukraine. We want to increase pensions but it has to be done responsibly.”
The switch to a new pension system in 2027 is also leading to uncertainty. If the new system comes into operation as planned, 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.