Dutch pension funds hit by war and falling interest rates in first quarter

Major pension funds that have moved to the new pension system saw their performance affected in the first quarter by the war in the Middle East and lower interest rates. This led to reduced pension growth for millions of participants. It is still unclear what impact this will have on pensions in 2027, but the funds say they have enough buffers to prevent any reductions in payments.

PFZW, PMT, and bpfBOUW moved to the new pension system on 1 January, alongside strong initial increases in pension payouts. In the new setup, pensions fluctuate more directly with financial market performance. Market conditions weakened in March following the outbreak of the Iran conflict.

Across the first quarter as a whole, the funds still recorded modest investment returns, according to figures released on Wednesday. However, falling interest rates pushed up the cost of pensions more sharply, meaning more money is now needed today to finance future payouts at the same level.

Based on preliminary figures, pensions already in payment would need to be reduced by 0.4 percent on 1 January next year, PMT estimates for its own participants.

The fund says this decrease could be absorbed using a small part of its solidarity reserve, meaning benefits would remain stable. A spokesperson described the figures as a “snapshot,” noting that the final impact on 2027 pension payments will only be determined using data from the end of September this year.

The impact differs widely depending on age. Younger members, who still have many years until retirement, may see larger fluctuations in their pension outlook. Older participants are exposed to less risk, as funds invest more conservatively to ensure more stable pension outcomes closer to retirement.

The first quarter showed a clear contrast: the pension accrual of a 35-year-old PMT participant dropped by more than 16 percent, while for 65-year-olds the decline was under 2 percent.

bpfBOUW and PFZW disclose fewer details. The construction pension fund says members nearing retirement are facing about a 2 percent decline in expected pensions. PFZW adds that large increases are unlikely in the years ahead, as investment returns will now be smoothed over several years.