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Dutch civil service union calls for delay in cuts to pension benefits

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  • Dutch civil service union calls for delay in cuts to pension benefits

NETHERLANDS - Dutch civil service union AbvaKabo has called on social affairs minister Henk Kamp to postpone mandatory benefit cuts at underfunded pension funds until the Pensions Agreement has been implemented in 2014.

Corrie van Brenk, the union's temporary chair, said: "By then, pension funds can probably discount their liabilities against a stable rate."

Her organisation has said it would be "irresponsible" for Kamp to oblige schemes to a benefits cut based on the current discount criterion.

Together with FNV Bondgenoten - the largest union for the market sector - AbvaKabo has voted against the Pensions Agreement within union federation FNV. It has also announced that it will act independently on the issue.

AbvaKabo wants the swap curve as the discount rate to be abandoned because of the negative effect of low and volatile long-term interest rates on pension funds' coverage ratios.

It said it expected the minister to introduce a new and more stable discount criterion for liabilities.

According to AbvaKabo, if pension funds were allowed to discount against a slightly higher interest rate, underfunding problems would be much smaller.

"Knowing that he is likely to abandon the swap rate that has turned out to be wrong, Kamp can't justify to make cuts mandatory because of this wrong discount rate," it added.

Kick van der Pol, chairman at the Pension Federation, recently argued that pension funds could wait no longer to take underfunding measures, as further delay would come at younger participants' expense.

IJmert Muilwijk, chairman of the youth organisation of labour unions federation CNV, told IPE he opposed a postponement of necessary discount measures.

In his opinion, such a delay would be against the spirit of the Pensions Agreement.

"We can't keep postponing the problems," he said, adding that the unions would no longer "get away" with such an approach.

He added: "If the minister heeds the call of AbvaKabo, it will already start undermining our faith in the new pensions system."

Peter Gortzak, vice-chairman at the Federation FNV, declined to comment on the civil service union initiative, as the situation of individual pension funds "differs too greatly".

He said the federation was thinking to issue a joint response with employers on the dire position of many pension funds.

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