Wednesday 19 February 2020

Dutch pension funds faring better but still not out of the woods

Pensioners on a bench


Despite slightly higher interest rates and booming stock markets worldwide, private pension funds in the Netherlands continued to under-perform in the first half of 2017. Nevertheless, the coverage ratio continues to improve, the Telegraaf said on Monday.

The coverage ratio is a measure of how much money is available to cover current and future pension requirements. Thus a coverage ratio of 110% indicates there is €1.10 in cash available for every €1 in pension obligations.

To avoid downturns, pension funds are required to have a minimum 5% coverage buffer. But a 20% buffer is needed to qualify as a truly healthy pension fund and, the Telegraaf said, very few pension funds meet this standard.

The biggest pension funds are well below the minimum: the metals sector fund, Pensioenfonds Metaal & Techniek, had a cover factor of only 96% in the first half of 2017, but that was well up on the 92.8% level recorded at end-2016.

The civil service pension fund ABP was pegged at 96% on 30 June, while the health care sector fund, Zorg & Welzijn, was at 94%. However, the building sector pension fund was very healthy with a coverage ratio of 110%.

The worse-performing pension funds will have to cut pensions if they do not reach the minimum soon.

The Dutch pension system is based on three parts: the state pension AOW, payable in full to everyone who has lived in the country for more than 50 years and at reduced rates for others; collective company schemes, which are usually compulsory; and private pension schemes. has been free for 13 years, but now we are asking our readers to help. Your donation will enable us to keep providing you with fair and accurate news and features about all things Dutch.
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