Verloskundigen, the €359m Dutch occupational pension fund for midwives, is to cut pension payments for the third consecutive year after reporting a funding ratio of 88.4%.
In its recovery plan, the scheme said it was anticipating a reduction of 0.75% at year-end, following cuts of 0.4% and 1.4% in 2016 and 2017, respectively.
However, speaking to IPE’s sister publication Pensioen Pro, the scheme’s chair Marlies Bartels put the measure into perspective by explaining that the scheme would discount the cut against its unconditional indexation of 2%.
As a result, pension rights would rise by 1.25% on balance, she said.
“Despite the rights discounts, we are performing above average in terms of retaining purchasing power,” said Bartels.
The net indexation granted by the pension fund has exceeded price inflation during the past five years.
In the opinion of Bartels, the scheme’s funding level – which is well below that typically required by schemes to allow inflation-linked payments – should be considered in the context of its fixed 2% indexation.
“Without this, our coverage would have stood between 130% and 140%,” she said.
In order to speed up recovery to the required minimum funding of approximately 105%, Verloskundigen has decided to reduce annual pensions accrual by 30%.
The €327m pension fund for the accountancy sector is the only other scheme in the Netherlands that is known to have applied a cut to payments this year.
It said a 30% cut was necessary as part of the transfer of its pension rights to Stap, the general pension fund (APF) established by insurer Aegon and its subsidiary TKP Pensioen.
The minimum entry level for the multi-client compartment of the APF equated to a funding of 105%. The coverage ratio of the accountancy scheme stood at 91.7%.