NETHERLANDS – There will be a roughly 3% or €500m drop overall in premium revenues of Dutch industry-wide pension funds in 2006, according to the VB, the Dutch Association of Industry-wide Pension Funds.
“2006 will again be a turbulent year for pension funds,” Vereniging van Bedrijfstakpensioenfondsen said in a statement.
The drop has been linked to new legislation regarding early retirement (VUT) and pre-pension schemes. Overall premium revenue is expected to drop from €15.3bn in 2005 to €14.8bn in 2006.
As in 2005, employers pay on average roughly two-thirds of premiums while employees cover one-third.
Meanwhile, pension indexation levels will remain unchanged at an average 75% of full index linking. Some funds are in a position to award backlog indexation after several years of lagging indexation levels, said the release.
“Because of the slump on stock markets in recent years, many pension funds were unable to apply full index-linking rates to pensions and accrued pension entitlements,” the VB said.
“Despite a buoyant recovery in cover ratios (reserves as a percentage of liabilities) in 2005, most pension funds are not yet in a position to meet their full indexation targets.”
Pensioners are being given 76% of full indexation on average, compared with 75% in 2005. The rate applying to still active employees goes up to 83% of full indexation in 2006 from 77% in 2005.
The VB represents almost 4.6m employees, 1m pensioners and 6m deferred pensioners.