Pension funds in the Netherlands are increasing contributions and lowering pension accruals in response to falling interest rates and stricter guidelines regarding expected returns.

As pension funds have to set their pension contribution and accumulation rates for 2021 and beyond at the end of the year in the midst of a recession, they are facing difficult choices.

“Pension premiums in the Netherlands are already on the high side now, and the increases necessary in order to prevent lowering new accruals are beyond of what social partners are willing or able to shoulder,” said Wichert Hoekert, a pension actuary at Willis Towers Watson.

So far, only a handful of funds have set their pension contribution and accumulation percentages for 2021, with most of them opting for a mix of contribution hikes and cuts in new accruals. The bulk of the funds has yet to announce their decisions.

The reason so many funds are forced to take these measures is that most Dutch pension funds base their contribution and accumulation policies on the expected returns from their investments.

“This is the case for two thirds of Dutch pension funds, and I expect the vast majority of these funds to have to take some kind of action on this front, either by reducing accumulation or by increasing contributions,” Hoekert said.

“I expect most of these funds to tilt towards cutting new accruals,” he added. This would confirm the picture that has already been building (see below).

The maximum expected returns pension funds are allowed to use when determining the necessary level of pension contributions to reach their accumulation targets are set every five years by a commission.

“The returns projected by the commission [led by former finance minister Jeroen Dijsselbloem] for the 2020-2025 period are dramatically lower than those for the preceding five-year period,” Hoekertsaid.

The projection for equity returns, for example, has come down from 7% to 5.8%. The projected return for bonds is a combination of expected equity returns and current market interest rates, which are also significantly lower compared to the previous five-year period.

Switch to DC

Hoekert believes the current difficult discussions between social partners about pension contributions could well be a reason for a faster transition to the new, defined contribution (DC)-based pensions contract.

Under the upcoming legislation, a draft of which is expected next month, pension funds will be required to make the transition by 2026 but can do so earlier.

“The pension contribution hikes of most funds will be insufficient to fully finance the new accruals which will negatively impact the funding ratios of the funds in question,” he said.


Health care scheme PFZW will hike pension contributions by 1.5 percentage points to 25% in 2021, and an additional 0.8 percentage points in 2022, its first such increase in eight years. New accruals will be unchanged.

“We realise this increase is no good news for the healthcare sector which is already under great strain during these turbulent times,” the fund said in a press release earlier this month, referring to the coronavirus pandemic.

“The low actuarial interest rate we are required to use by law results in a precarious financial position for the fund,” it added. “Due to the current macroeconomic environment, we also expect lower financial returns in the future. These two aspects make an increase in pension contributions necessary in order to be able to fulfil our pension obligations,” it added.


After social partners not reaching an agreement on the level of contribution hikes, Detailhandel, the pension fund for the the retail sector, decided on an increase of 2.25 percentage points to 24.75% in 2021. New accruals were also reduced from 1.56% to 1.41%.

The new metrics will be valid until the pension fund makes the switch to the new DC-based contract.

Mari Martens, pension negotiator on behalf of trade union FNV, said: “This is the first time in the history of Detailhandel pension fund we could not reach an agreement with the employers about the level of the pension contributions. We would have liked to have seen an additional increase of 0.75%, but that was unacceptable for the employers.”

Detailhandel is unlikely to be the only fund with social partners failing to agree on pension conditions. For a number of funds, such as the scheme for rail workers Rail & OV, negotiations are reportedly in a deadlock.


The pension contributions of multi-sector fund PGB will increase by 4 percentage points to 28% in 2021, with an additional increase to 30% the next year. New accruals will remain at 1.75%, though employers that take part in the fund on a voluntary basis have the opportunity to choose for a lower level of new accruals.


The €1.6bn ING CDC pension fund announced a 33% cut in new accruals to 1.196% as of 2021. Last year, the fund, which has a fixed pension contribution of 31.5%, had already reduced the accumulation from the fund’s ambition of 1.784% to 1.3%.

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