ABP, the e146bn Dutch civil service pension fund, has announced that it will raise the rate of contributions from employers and employees from 13% to 15%, as a result of weak stock markets.
Fernando Jadoul, ABP’s director of public affairs, said: “After looking at the scheme’s financial position, we felt it necessary to raise the premiums.” The change will take effect in January.
In April this year, ABP reported a decline in pensions capital in 2001 from e150bn at the start of the year to e147bn at the end. The decline was attributed to disappointing returns coupled with the decline in net assets and overlay contracts.
At the time, ABP said it would be redrafting its financial strategy to help it recover, and in the process would raise premiums.
ABP reviews the premium rate on an annual basis, and last year dropped the premium from 14% to 13%.
Jadoul added that the demographic situation of the fund was a further factor in the decision.
The raising of premiums is not popular with the employers and employees affected. The employers will pay 75% of the premium, and the employees, 25%.
Says Loek van Daalen, spokesman for Dutch pensions watchdog PVK: “In general it is never popular to raise premiums, but it is up to the funds how to match their liabilities with their obligations. There are other methods of bringing in more money, such as a loan from parent company, or stopping indexation, but raising premiums could be necessary too.”
The issue of raising premiums to ensure that liabilities are matched has been a matter of debate in the Netherlands recently.
In October PVK wrote to the Netherlands’ 1,000 pension funds, warning 300 of them with insufficient coverage that it may intervene in the running of the scheme if they did not address the issue. It asked the relevant funds to submit details of their plans to counter the deficit, be it by raising premiums, getting money from mother companies or by increasing the age of retirement.