NETHERLANDS - The €246bn Dutch civil servants and teachers scheme, ABP, has announced that it intends to cut participants’ pension benefits by 0.5%.
The cuts will apply to both active participants and retirees.
The scheme also announced that the temporary contribution increase it put in place previously would be increased from 1% to 3%.
The new measures have been included in the recovery-plan evaluation the scheme is to submit to the pensions supervisor (DNB) and are subject to regulatory approval.
The measures are dictated by the fact that ABP’s funding ratio, which stood at 94% at the end of last December, is now too low to feasibly recover to the required level of 105% by the end of 2013.
The scheme said this was mainly due to the low interest rates the scheme must apply as the mandatory discount rate.
“For this reason, ABP will once again make its arguments to the DNB as to why the scheme favours a discount rate based on a one-year average interest rate,” it said.
Unless ABP’s financial situation improves drastically, the benefit cuts will take effect from April 2013.
Premium contributions will increase from 1 April, but will be adjusted to raise the intended extra contribution for 2012 and 2013 in the remaining 21 months.
Of these pension contributions, employers will pay 70%, while employees raise the remaining 30%.
Both the employer and plan participant councils have agreed to the measures, although both councils have called them “painful”.
According to ABP, a “sizeable minority” of the participant council was, in fact, opposed to the decision.
Trustee board chairman Henk Brouwer said he could “very well understand” the disappointment of ABP employers and participants.
But with these measures, at least, “the contribution that workers, retirees and employers are asked to make to the recovery of the fund, is distributed fairly”.
He added: “The cuts will hit working plan participants in the accrual of pension rights, while retirees are hit in their retirement benefit payments.”