Monday 23 May 2022

125 pension funds will have to cut pay-outs, says central bank

The Dutch central bank has taken the ‘highly unusual’ step of altering the way it calculates how much money pension funds should have in their reserves but 125 pension funds may still have to cut pay-outs in 2013, the Volkskrant reported on Friday.

The bank has opted to use a three-month average rather than the year-end interest rate to make the calculations. This is because interest rates have been extremely low for a long period. The lower the interest rate, the higher pension fund reserves need to be.
In addition, the bank has opted to limit the maximum reduction to 7%. On average, pensions will be cut by 2.5%. Millions of workers will be affected
Necessary decision
‘The extraordinary situation on the financial markets makes this decision necessary,’ the central bank said in a statement. ‘The aim of both measures is to reduce the uncertainty over pensions’.
The change means that 125 funds rather than 180 will be forced to make cuts next year, unless the financial markets improve.
Central bank director Joanne Kellerman told the Financieele Dagblad pensions had never been reduced on such a scale before. ‘We want to give clarity and remove uncertainty about the size of the cuts,’ she said. ‘We all have to work to calm the storm.’

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