Pensions in the Netherlands hard hit by crisis

30th January 2009, Comments 0 comments

The four largest pension funds in the Netherlands have been hard hit by the financial crisis. Lowering of pensions is now a serious option.

THE HAGUE— Pension funds in the Netherlands have been hard hit by the financial crisis. The level of cover of several pension funds has sunk below the obligatory 105 percent, says The Dutch Association of Industry-wide Pension Funds. Most pension funds are not expected to keep pace with inflation and wage increases this year. A number of funds will be forced to increase premiums, although the payment of pensions will not come under threat in the next few years.

Speculation on lowering pensions is a measure that hasn’t been used since the Second World War. Director Frans Prins of a nonprofit organization for business pensions representing 350 pension funds called it “a last resort…. I hope that it won’t happen.” He did say that a decrease would be unavoidable with some funds.

The largest pension funds in the Netherlands APB, responsible for a quarter of Dutch pensions, announced yesterday morning that it could cover only 90 percent of its investments.

The four largest funds have announced the biggest losses, namely, ABP (civil servants and teachers), Zorg & Welzijn (health sector), Metalektro and Metaal & Techniek. ABP lost 39 percent of its value last year, and Metalektro lost nearly 46 percent.

Zorg and Welzijn, covering the health sector, is asking politicians in The Hague for a three-year recovery time. Their level of cover fell from 126 percent to 92 percent in the fourth quarter. As a result premiums for these pensions will be increased while pension payments are lowered. Around 2.1 million people pay into this pension fund, which has lost 16 billion euros in the financial crisis.

Most pension funds have scrapped price indexing. This effects both the retired, and the working. Declining interest rates in the forth quarter last year account for a high percentage of the funds decreased value. Low interest rates spell higher premiums, which is passed on to working people.

Radio Netherlands/NRC Handelsblad/Expatica

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