Funds set inflation rates
The two largest Dutch pension funds have unveiled their indexation rates for this year. Civil service fund ABP has announced that there will be a 1.77% increase of pensions in 2004, higher than the rise in the average cost of living. This represents two-thirds of the rise in public sector salaries.
Healthcare fund PGGM will retain full indexation in 2004, at 2.05%.
Index gradation – “staffeling” in Dutch - is set to be introduced from January 1 2005. This means that there will be a direct link between coverage ratio and indexation. Until now, total indexation has been the practice, meaning that indexation was an average of all salary increases of the sectors the pension fund covers.
PGGM spokesman Kees Verhagen said the fund would have to raise its pension premiums going forward, to reach the targeted coverage ratio of 120% in 2010/2011. The pension premium will be 13% in 2004, for 2005 the plan is 15.5%.
This then would be already the targeted level. This has been necessary due to the stated index gradation system of the regulator, the Pensioen- & Verzekeringskamer. The fund does not expect any more premium increases.