Cost-cutting ABP lowers contribution by nearly 4 percentage points
The €293bn civil service scheme ABP has lowered its contribution by 3.8 percentage points to 21.6%, mainly following cost-cutting measures for its pension fund.
It said the main reasons for its decision were the reduction of the yearly pension accrual from 2.05% to 1.95% for 2014 and the increase of the official retirement age from 65 to 67.
Half a percentage point of the premium reduction came as the result of ending a temporary recovery levy, leaving the excess contribution for recovery at 3 percentage points for 2014.
ABP said it based its decision on its funding of 106.2% on 1 November.
However, it stressed that the financial position at year-end would be “crucial”.
If its coverage ratio is less than the minimum required level of 104.2%, a second rights cut – effective as of 1 April 2014 – will be unavoidable, it warned.
However, if the scheme’s funding is sufficiently solid at year-end, the board may decide to undo last April’s rights discount of 0.5%, ABP said.
If the coverage ratio is unexpectedly high on 31 December, the board may even look into the possibility of removing the remaining recovery levy or indexation, it said.
Opposition politicians have been suspicious of the motives behind the sudden and significant premium reduction at ABP.
Barry Madlener of the Freedom Party (PVV) said he suspected the government might have played a role in the decision.
“Other pension funds don’t seem to be keen to follow ABP’s example,” he said.
Paul Ulenbelt, spokesman for the Socialist Party (SP), echoed the sentiment.
“It is very odd that, soon after a 0.5% rights discount, the contribution is decreased by 3.8 percentage points,” he said.
“It seems the Cabinet is granting the civil servants a salary rise, without paying them from the national budget.”
On its website, the AbvaKabo, the largest public sector union, claimed it achieved a net salary increase of 2% for civil servants as compensation for the reduced pensions accrual.