Over 7 million NL residents could face pension cuts next year, large funds warn
Over 7 million Netherlands residents have to take into account that their pension benefit may be lower next year. The three largest pension funds in the country have too little cash to meet the government's funding ratio requirement and have little hope of meeting that target by the end of the year, they said to NOS.
In June, Minister Wouter Koolmees of Social Affairs and Employment announced that due to the coronavirus crisis, he will lower the coverage ratio from 100 percent to 90 percent this year. That means that instead of needing enough cash in hand to cover 100 percent of future pension payments, pension funds only need enough to cover 90 percent by the end of December. But even that 90 percent may be impossible to achieve, according to the three largest funds' analyzes of their first half of 2020.
ABP, the pension fund for government employees, is in the most trouble with a coverage ratio of 85.2 percent at the end of June. "As a result, based on the current state of affairs, the chance of a pension reduction for next year is realistic, also with the amended rules recently announced by Minister Koolmees," ABP chairman Corien Wortmann-Kool said to the broadcaster.
Health and welfare employees' pension fund PFZW and the fund for metal workers PMT also had funding ratios below 90 percent at the end of June. They called the chance of falling short at the end of December "significant"and "large", according to NOS.
The large pension funds have been struggling to meet the coverage ratio for some time. Koolmees also had to lower the funding ratio last year, to prevent pension cuts this year. The coronavirus crisis only made matters worse.
The first quarter of 2020 was particularly dramatic, due to massive losses on the stock market and falling interest rates. The stock market improved slightly in the second quarter, but interest rates remained low. Which means that the funds' positions improved only slightly. "There is no reason to put aside our concerns yet," Benne van Popta of PMT said to NOS.