Pensioenfonds Levensmiddelen may have to cut pensions again this year, the fund has announced in its annual report. Despite the rise in interest rates this year, the fund’s funding ratio is still below 100%.

According to current rules, the pension scheme must have a funding ratio of at least 104.3% to avoid a new cut of pension rights, after the fund already cut pensions by 0.85% at the start of this year.

Pensioenfonds Levensmiddelen admits in its annual report it is unlikely to be able to reach this threshold in time.

The situation at €7bn the scheme stands in sharp contrast with developments at other sector schemes such as ABP, PME, PMT and PFZW.

All these funds saw their funding ratios increase dramatically in the first half of this year, allowing them to index pensions again for the first time since 2008.

Levensmiddelen’s funding ratio only rose from 96.6% at the end of 2021 to 98.9% at the end of May.

The reason for the modest rise is the fund’s fateful decision to increase its interest rate hedge to 60% from 35% at the start of the year.

The pension scheme did this to hedge itself against a further decrease in interest rates, but rates rose instead. As a result, the fund’s liabilities decreased by less than those of other funds with lower interest rate hedges.

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