The €29bn Dutch ING Pensioenfonds said it has postponed its decision on inflation compensation until the end of the year, as it wants to get a better picture of the impact of COVID-19 on its funding level.

The closed scheme, which serves both staff of ING Bank and NN Group, applies its funding level in real terms as criterion for its indexation.

As its real coverage ratio has been at least 91% on average during the past 12 months, the board can decide to grant full indexation, which should be 3% of the salary index for workers this year. At the end of April, the scheme’s real funding level stood at 95.7%.

In December, ING Pensioenfonds will also announce the indexation for pensioners and deferred participants, which is drawn on the consumer price index. In January, they received 1.73%.

However, even if funding were to drop significantly in the coming months, employees of ING Bank and NN Group would not need to worry about their inflation compensation, as the pension fund could tap into a €265m emergency reserve fund.

The indexation depot had been established in 2014, when the pension fund switched from unconditional indexation to inflation compensation subject to the pension fund’s financial position.

Last month, the €30bn ABN Amro Pensioenfonds announced it also would postpone its indexation decision to July, despite its 130% funding level in April.

The €27bn Rabobank Pensioenfonds, which usually decides in June on inflation compensation, said its financial position hadn’t allowed for such a pensions increase since last summer.

In April, its coverage ratio stood at 104.9% – it would only be able to grant indexation partiallly when its funding level is above 115%. Full indexation is only possible if its coverage exceeds a 130% funding level.

Earlier in 2019, the Rabobank scheme raised pensions by 0.45%.

Pension funds of Dutch banks are in better shape than the large sector schemes ABP, PFZW, PMT and PME, as they receive more generous contributions from employers and have often a much higher interest hedge on their liabilities.

To read the digital edition of IPE’s latest magazine click here.