The Netherlands’ largest pension fund has cut its investment return assumptions for the next 10-15 years to 5% a year on average.

The €399bn Dutch civil service scheme ABP said this compared to the 6% average annual return it had achieved during the past five years.

Its announcement came as part of its fourth-quarter report, which showed it lost 4.6% – equivalent to roughly €20bn – since September, contributing to an annual loss of 2.3% in 2018.

The €199bn healthcare scheme PFZW and the €46.5bn metal industry pension fund PME also reported quarterly losses, of 2.7% and 3.9%, respectively. These resulted in annual losses of 0.4% for PFZW and 0.9% for PMT.

The €71bn metal industry scheme PMT and BpfBouw, the €56.6bn pension fund for the building sector, posted positive results for 2018: PMT gained 0.2%, while BpfBouw added 0.3%.

“Our members are about to pay the price for the lack of a pensions agreement”

Eric Uijen, executive chairman, PME

The annual reports of the five largest pension funds in the Netherlands showed that the volatility of financial markets, combined with falling interest rates in the last quarter, had largely undone the schemes’ slow recovery during the first three quarters.

Funding ratios take major hit in 2018

As a result of disappointing returns, the coverage ratio of the pension funds took a significant hit, increasing the underfunded position of PFZW, PME and PMT and taking ABP’s funding back to below the minimum required level of 104.2%.

With a coverage ratio of 118.3%, BpfBouw was the only scheme that remained at a safe distance from the danger zone of pension cuts.

Several schemes urged the cabinet and social partners to take action to address the worsening situation in order to avoid cuts to benefit payments in the coming years.

“Our members are about to pay the price for the lack of a pensions agreement,” warned Eric Uijen, PME’s executive chairman.

Peter Borgdorff, director of PFZW, said that looming cuts in 2021 increased the need for new agreements about the Dutch pensions system. The latest discussions between government, employers and unions collapsed in November.

The coverage ratio of both PFZW and PME stood at 101.3% at December-end.

However, PME faced a more immediate threat as it must already raise its funding ratio to the required level of 104.3% by the end of this year in order to avoid cuts in 2020.


ABP, with its coverage dropping to 103.8%, also concluded that the chance of pension discounts in 2021 remained undiminished.

The civil service scheme saw its equity holdings losing almost 11% in the fourth quarter and 4% over the entire year.

As a result of plummeting oil prices, the pension fund lost 19.9% in the last quarter on this exposure, while gaining 1% on property.

ABP’s holdings in infrastructure and hedge funds produced 4.5% and 2%, respectively, since September, and returned 12.4% and 8.5%, respectively, over the entire year.

The pension fund made quarterly and annual profits of 0.9% of 0.4%, respectively, on its large fixed income portfolio. It said its combined interest and inflation hedge generated a positive annual result of 0.4%.

However, its currency hedge lost 2.3% as a consequence of the euro declining relative to the dollar.


PFZW announced a quarterly loss of 3.9% and an annual loss of 0.4%.

It posted a negative quarterly result for its commodities allocation (-34.4%), equity allocation (-11.5%), and its insurance portfolio (-3.6%). The asset classes all lost money over the year, with commodities down 17.8%, equities down 8.8% and insurance losing 3.1%.

The healthcare scheme attributed a 16.4% loss for the year from its inflation-linked bond portfolio to a significant drop in expectations for inflation.

PMT, BpfBouw

Metal scheme PMT lost 1.8% in the fourth quarter, but achieved a modest annual return of 0.2% for the year.

At December-end, its funding stood at 102.3%. PMT’s funding ratio must also hit 104.3% by the end of the year to avoid benefit cuts in 2020.

BpfBouw reported a quarterly loss of 2.7%, but returned 0.3% over the entire year.

Its property holdings – managed by Bouwinvest – generated 12.3%, while alternatives and fixed income gained 4% and 0.9% last year. The building scheme said it lost 5.6% on its equity allocation.