Renewed hope for pension increase despite Ukraine war

After years, the large Dutch pension funds hope to finally increase their pensions again. Their financial position improved considerably last quarter due to rising interest rates, despite the strong headwind on the stock markets due to the war in Ukraine. If the government relaxes certain rules for the funds, as expected, higher pensions will be within reach for millions of Netherlands residents.

Harmen van Wijnen, chairman of the board of civil servants' fund APB, explained that the funds are benefiting from the rising interest rates. As a result, their financial obligations according to the calculation rules are suddenly much lower. This more than offsets the funds' losses due to Russia invading Ukraine. In the past period, ABP did lose 21 billion euros on its assets, mainly because certain shares and bonds fell in value.

An important indicator for the funds is their policy funding ratio. At ABP, this has increased to 106.5 percent, which means that the Netherlands' largest pension fund has almost 1.07 euros in cash for every euro in future pension obligations. Under the current rules, this is not yet sufficient to allow an increase in pensions. But parliament is currently considering a proposal to lower the limit to 105 percent from July 1.

Metal industry pension fund PME also has a policy funding ratio of over 105 percent. If the proposal in parliament is adopted, it too could increase pensions. "As soon as it is possible to do so responsibly, we want nothing more than to increase pensions. That is not yet possible because we are right on the limit where - if the rules are ratified by parliament - we can possibly index," said Eric Uijen, chairman of PME's executive board.

Healthcare fund PFZW and the other metal fund PMT are in a slightly worse position with policy funding ratios of 103 percent. However, they too are optimistic. "Our coverage ratio has not been this high in years. With this coverage ratio, indexation is finally in sight," said PMT employee chairman Jos Brocken. He stressed that a pension increase is badly needed, especially with rising inflation. PMT hasn't increased pensions since 2008. "We see that groceries are becoming more expensive, and energy prices are rising. All this together hits our participants, whose pensions on top of the state pension often do not exceed 600 euros per month, hard in the wallet."

Trade union CNV urged the pension funds to increase pensions as soon as possible. According to CNV, the funding ratios are historically high. At the same time, senior citizens' purchasing power is plummeting due to high inflation. Dozens of CNV members are facing financial problems. "Postponement of indexation can no longer be defended," CNV said.