The Dutch Central Planning Bureau (CPB) has estimated contribution levels in 2016 at pension funds in the Netherlands will have fallen by 11% compared with contributions in 2013.
It also expects pension contributions to decline by €2.4bn this year and another €2bn next year – €4.4bn less than the contribution payments Dutch pension funds and insurers collected over the course of 2013, according to a CPB report on the effects of the changes in financial pension regulations.
In its report, the CPB estimated that adjusted parameters and a new financial assessment framework for pension funds would increase the contribution level by 5%.
However, it pointed out that tax allowances for pensions saving had been reined in, leading to a 16% fall in contributions.
The net result, it said, would be an 11% overall decline.
Under the new financial assessment framework, pension schemes in 2015 will still have the option of smoothing mandatory, cost-covering contribution levels by either applying a 10-year average interest rate or expected returns.
The CPB has predicted that, if pension funds opt for the former, contributions will fall by less than 11%, as “higher interest rates from the years preceding 2008 will gradually be replaced by lower expected rates in future.”
Contribution levels calculated on the basis of expected returns are presently somewhat lower than contributions based on average interest rates, and the spread widens as pension funds invest in riskier assets.
In other words, pension funds can lower their contributions by investing in riskier assets.
As a consequence, the CPB said, there is “a certain tension” between “the goals of most schemes that wish to take more investment and interest-rate risk on the one hand, and the required nominal guarantees on the other”.