A handful of Dutch funds can only award a maximum indexation of 3% to their members because they have not linked the maximum indexation potential to a wage or price index.

The funds in question include €25bn multi-sector scheme PGB and the pension fund for pharmacists SPOA. The latter fund will increase pensions by just 1.5% in 2023, despite a funding ratio in excess of 120% (end of October).

The fund cannot index more because that would be in violation of the fund’s own rules, according to SPOA president Mariëtte van de Lustgraaf.

A handful of other pension funds have similar indexation ceilings. These include the funds for physiotherapists and midwives, which provide automatic annual indexation of 2%, as well as a discretionary additional indexation of another 1% for all members.


Many other pension funds will index pensions by double-digit figures next year, including civil service scheme ABP. These funds tend to base their indexation percentage on the consumer price index (CPI).

“Pension funds that do not link their indexation to a wage or price index now see themselves confronted with the fiscal rule that limits indexation to a maximum of 3%,” explained Wichert Hoekert, an actuary at WTW.

Wichert Hoekert at WTW

Wichert Hoekert, WTW

When a new financial assessment framework for pension funds was introduced in 2015, some funds opted for a fixed indexation maximum of 3% rather than linking this to inflation. This seemed attractive at the time, because inflation was low.

“By choosing this option, funds gave themselves the discretionary power to hand out additional indexation if their financial position allowed for it,” said Hoekert. According to a spokesperson for the Dutch tax authorities, the 3% limit is based on “a kind of long-term average of the wage and price indices.”

PGB had a funding ratio of 120.8% at the end of October, allowing the fund to in principle index pensions by significantly more than 3%. The pension fund is considering a return to CPI as an indexation benchmark, according to president Jochem Dijckmeester.

Willem Noordman, responsible for pensions at the Netherlands’ trade union FNV, believes the 3% indexation limit is no longer fit for purpose, and must be changed. “It’s very important this will happen at short notice,” he said in a written response to questions from IPE.

The PGB board, which includes two FNV members, can decide independently about changing its indexation benchmark without interference from social partners, according to Dijckmeester. It plans to make a decision on the matter next week.

“I do not want to anticipate any decision, but re-instating the CPI as our indexation benchmark is a serious option,” said Dijckmeester.

PGB had moved from the CPI to a fixed benchmark in 2015 because it was difficult for the fund to provide retroactive indexation, according to Dijckmeester.

Pension transition

SPOA, which had also moved to a fixed indexation policy in 2015, is not planning to change its rules in order to be able to index more.

“This has no priority for us. Right now, we need all our attention for the transition to the new pension system,” said Van de Lustgraaf. “If we end up with a buffer when we make the transition to the new pension system [in 2025], we will then distribute this to our members in the form of a higher pension pot or increased benefits.”

The pension fund for physiotherapists isn’t planning to adapt its indexation benchmark either.

“We want to be careful with our buffer because we already want to make the transition to the new pension system on 1 January 2024,” according to the fund’s president Doreth van den Heuvel.

The pension fund for midwives has scrapped its 2% fixed indexation for the time being because of its funding situation. An indexation in excess of 3% is therefore not on the cards for the fund.

WTW’s Hoekert does not expect any other funds to adjust their indexation measure with the pension transition coming up. In the new system, he noted, indexation will be more directly linked to investment returns anyway.

“We advise some of the funds in question. They are not planning to adjust their pension arrangements to allow for higher indexation, even though there could be reasons for it,” he said.

PGB’s Dijckmeester does, however, see the upcoming switch to defined contribution as an additional reason to change the fund’s indexation benchmark.

“Since the transition to a new pension system is coming up, it will now be more difficult to compensate for indexation that was missed earlier,” he said.

The latest digital edition of IPE’s magazine is now available