Pension funds in better shape after good year for investments

Dutch pension funds are in better shape than a year ago, research agency Aon has determined. The funds had a "very good year" for their investments. The funds also benefited from rising interest rates in the first half of last year.

The average coverage ratio of the funds increased from 115 to 116 percent in 2024, according to Aon. This means that the funds have approximately 116 euros in cash value for every 100 euros in pensions which they need to disburse now and in the future.

It already looked as if pensions were on the rise again at many of the Dutch funds. Pensioenfederatie, the organization representing 156 of the country's pension funds, calculated last month that pensions were increasing at roughly four out of five pension funds. Sometimes the pensions are fully adjusted for inflation, but more often it is a partial increase. The increase averaged just under 2 percent.

What played a role in the funds' considerations is that the European Central Bank has been lowering interest rates recently. The funds also want to retain sufficient buffers for their transition to the renewed pension system.

Preparations have been underway for the large-scale reform of the pension system for some time now. Soon, everyone will build up a pension via a premium scheme where the money will then be invested. Participating residents will have more decision-making over their retirement savings in this regard. There are also concerns, because the risks will be borne by participants which could see them take on greater losses or generate lower earnings, adversely affecting their pensions.

The first three funds have already made the switch, Aon said. The first lawsuit about the switch has also already taken place. A participant in the agriculture workers' BPL pension wanted a postponement to get more time to delve into the changes, but the Rotterdam court deemed that to be unnecessary. BPL was an early adopter, because pension funds have until the start of 2028 to make the switch.

Aon Nederland Director Frank Driessen said he believes that many people will ultimately benefit from the transition to the new system. "We expect that many participants will be able to expect an increase in their pension during the transition. Pensions will indeed fluctuate more with economic conditions, but many funds are creating a reserve to absorb declines as much as possible and can increase pensions if returns are good," he stated.