Large funds temper pension increase expectations

Several large pension funds are tempering expectations about a possible increase in pensions. Metal fund PME said that the financial position is “still insufficient” to implement pension increases by the end of this year. The pension fund for the metal and electrical industry PME warned that a possible increase in pensions would unfortunately be “small.” Healthcare fund PFZW previously said that pensions will probably remain the same next year as this year.

That would mean that many pensioners will probably not or hardly see their pensions increase soon. The lower interest rate means the funds must set aside more money to meet future pension obligations. Despite solid investment returns, they saw their financial position deteriorate last quarter.

Of the large funds that addressed the issue in their quarterly reports, the civil servant fund ABP seems to be the most positive. “Fortunately, ABP is allowed to use more flexible rules, just like in the three previous years, which allows us to increase more. This is allowed because we will switch to the renewed pension system in 2027,” said board chairman Harmen van Wijnen. He cannot yet provide any certainty about pensions for next year, since ABP, like the other funds, will not formally make a decision until this autumn.

ABP said it would like to index, but that it still has “a few stressful weeks” ahead of it. If pensions at the Netherlands’ largest pension fund can increase, it will be by a maximum of 3.56 percent. ABP will look at the financial position at the end of October and the price increase between September 1 last year and September 1 this year for its decision. Statistics Netherlands (CBS) calculated inflation at that percentage for this period.

Each fund makes its own assessment. Due to the uncertainty about interest rate developments and the financial markets, PME decided in April not to use relaxed regulations in the run-up to the new system. PME director Eric Uijen issued a “profit warning” with the fund's quarterly figures. “A possible increase in pensions will unfortunately be small this year.”

The funds also want to be well-prepared for the upcoming changes in the sector. PFZW already said in July that it wants to be cautious with increasing and decreasing pensions in the run-up to the new system. This is to be able to start the new system in a financially healthy way.