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Dutch funds raise premiums instead of granting indexation – DNB

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  • Dutch funds raise premiums instead of granting indexation – DNB

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NETHERLANDS - Most Dutch pension funds have refrained from granting indexation for 2012, due to their worsening financial position, according to supervisor De Nederlandsche Bank (DNB).

Instead, they have raised contributions from 16.9% to 17.4% of salary, the regulator concluded, after a survey of 25 large schemes.

In 2011, the coverage ratio of Dutch pension funds fell from 107% to 98% on average, mainly thanks to a drop of long-term interest rates, the criterion for discounting liabilities.

If a scheme's funding decreases to less than the minimum required coverage of 105%, it is not allowed to raise pension rights and benefits.

Indexation for the salary and price seen in 2012 would equate to a 1.2% increase.

Since 2007, pension funds are in arrears of an indexation of approximately 7% on average, according to DNB, which noted that company schemes have performed relatively better than industry-wide pension funds.

The regulator further found that workers' contributions had risen from 6% to 6.2% of the salary, while employers' premiums had gone up from 10.9% to 11.3% on average.

At company schemes, where sponsors usually pay for a contribution rise, the employers premiums have risen from 24.7% to 26.6%, DNB indicated.

However, the regulator added that contributions might even increase further, following the current review of many recovery plans.

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