Government takes steps to ease pain for pension funds

And pensions funds which are failing to meet government targets will be given ‘breathing space’ in 2013, meaning they will not have to increase premiums immediately even if they break coverage ratio rules.

In addition the central bank is to change the way interest rates are calculated. This means they will be less sensitive to financial market shifts, acting social affairs minister Paul de Krom said in a briefing to MPs.

Coverage

Earlier this year, it emerged 103 of the country’s pension funds would have to cut payouts by an average 2.3% next year.

But the new rules mean 22 funds will escape having to take drastic measures, the NRC reported.

Dutch pension funds have been hit by low interest rates, which have forced their coverage ratios well below the required 105%. This means technically they do not have enough assets to cover all their pension obligations.

‘These measures make the pension system more manageable and balanced,’ De Krom said. ‘This will contribute to the trust we need across the generations to maintain a collective pension system, for future generations as well.’

Disappointment

Pension funds reacted with disappointment to the plans. The giant civil service fund ABP said there are positive elements but the government should do more to dampen the effect of the unease on the financial markets.

ABP said earlier it will cut pensions next year and a spokesman told website nu.nl a further cut may be necessary in 2014.

Pension fund federation Pensioenfederatie said the minister had missed an opportunity.