Employers and trade unions in the agricultural sector said they want to raise the contribution at industry-wide pension fund (BPL) by 3.3% to 25%, in order to improve the scheme’s funding.
Although BPL does not have to increase its premium – its agreement for a fixed contribution extends to 2022 – social partners want to improve the scheme’s financial health earlier, explained Richard Devue, the pension fund’s director.
He said social partners have become increasingly aware that BPL’s current pension plan is no longer future-proof.
At the end of November, BPL’s coverage ratio stood at 92.4%, while its “premium funding” – which indicates to what extent the paid in contributions in a given year are sufficient to finance new pension claims – was approximately 60%.
BPL is the first large sector scheme in the Netherlands to want to significantly raise its contribution in 2020.
Social partners are considering an increase to BPL’s premium by another 1.4% in 2021, possibly in combination with an accrual reduction.
At the moment, annual pensions accrual is 1.875%, which equates to the maximum tax-facilitated level.
As a consequence of the new agreement, BPL’s premium coverage ratio is to rise to approximately 75% in 2021.
Other large pension funds, including ABP, PFZW, PME and PMT, have announced they would keep their premiums unchanged next year.
However, three of them have indicated that a sharp increase of contributions in 2021 cannot be avoided.
The €29bn multi-sector pension fund PGB has said it would keep its contribution for 2020 at the current level, but would apply a 4% increase for 2021.
The decision of the large industry-wide pension funds to stick to the current status quo next year has drawn criticism from pension experts.
Marc Heemskerk, actuary at Mercer, has warned that this would lead to bigger rights cuts later.
Consultancy Willis Towers Watson said that, if interest rates remained at the current low level, the minimum required contribution may have to rise by up to 40%.