PME and PMT, the pension funds for the Dutch metal industry, have said they intend to use their surplus contributions to try to avoid making rights cuts resulting from funding shortfalls.

In its annual report, the €42bn PME said it transferred 2.8 percentage points of its 23.6% premium into a deposit for smoothing out contributions, as the current premium exceeds the cost-covering level.

It will use any remainder to mitigate future discounts, it said.

As of the end of April, PME reported a funding of 92.4%, whereas PMT’s coverage stood at 89.6% at the end of February.

In the Netherlands, pension funds must begin cutting pension rights if their year-end funding falls is below 90% or thereabout.

Last year, PME transferred €111m into its equalisation fund, while both schemes, which share MN as their provider, introduced a uniform contribution of 23.6% of the pensionable salary for a five-year period.

PMT, the €63bn scheme for the mechanical engineering industry, was able to place €267m into the equalisation reserve thanks to a premium surplus of 3.9%.

In its annual report, it also said it would draw on the buffer as soon it had to discount pension rights.

The initial purpose of the reserve was to supplement the contribution, if the paid premium was lower than the cost-covering level for an annual pensions accrual of 1.875%.

PME and PME estimate that their surplus contributions will be 0.2% and 1.25%, respectively, this year.

Since the start of 2015, PME has used expected returns to determine its cost-covering premium, as it thinks this aligns its investment policy through matching and return portfolios best.

Until then, it drew its premium from interest rates.