Five of the 10 largest Dutch pension funds are rapidly using up their financial reserves as a result of the credit crisis.
 
 As interest levels fall, shares are losing their value, so the funds out of which pensions are paid are receiving a smaller return on their investments. Reserves for pension funds can meet between 85 and 95 percent of their financial obligations. The legal minimum is 105 percent. The funds are for the civil service, the health, welfare and transport sectors and the steel industry.
 
 To avoid future problems, many funds will not attempt to keep pensions in line with inflation in 2009, which will have an adverse effect on pensioners' purchasing power.
 
 Social Affairs Minister Piet Hein Donner has ruled out compensation for pensioners whose incomes are affected.
 
 So far, there has been no general discussion of an increase in premiums. Only the pension fund for the steel industry has decided to increase premiums, which are paid partly by the employers and partly by the employees.
 
 The director of the Dutch Association of Pension Funds said there is no reason for panic as funds have more than enough money to pay out pensions for the next 40 years.

The Dutch pension system  
Ten funds guarantee the pensions of four million Dutch retirees, that is half of all pensioners in The Netherlands. All in all there are 600 funds.

Pensions are not paid directly out of the funds. All the funds' money has been invested or put into savings accounts. The returns of the investments, and the interest on the savings, provide the money from which the pensions are being paid.

Other countries have a tax-based pension system, where the government hands a part of its tax income directly on to retirees. The Dutch premium-into-fund system is intended to provide a buffer against fluctuations in the financial system.

The biggest fund is the ABP civil service workers fund with a capital of 200 billion euros. ABP says is it safely over the 105 percent limit.

The second fund caters for pensions in the health and welfare sector; it is managing 90 billion euros. Its guarantee level has fallen to 95 percent.

The third fund in size is the PMT metal workers fund, owning 30 billion euros, and currently able to guarantee just 86 percent of pensions.

December 2008

Radio  Netherlands 2008