It’s a bit of a mixed bag though: now that the uncertainty in the world is increasing, due to war and a poorer economic outlook, the large pension funds are once again prospering. As a result, an increase in supplementary pensions (on top of the state pension) for millions of pensioners and employees is once again in sight.
Global uncertainty translates into rapidly rising interest rates. And high interest rates directly lead to better figures for pension funds.
For example, the four largest funds were able to present their best quarterly figures since the outbreak of the financial crisis in 2008 on Thursday.
Remarkably, the funds all suffered investment losses. Pension fund ABP, for example, for civil servants and educational staff, saw its assets fall from EUR 552 billion to EUR 531 billion in the past three months.
This loss was more than offset by the positive effect of interest. If it rises, funds can assume that their assets will appreciate more quickly. As a result, the amount that they now need to have in cash to pay future benefits falls. At ABP, this amount – the fund’s ‘liabilities’ – fell from 499 to 452 billion euros.
Larger reserves
As a result, ABP saw its so-called funding ratio rise from 111 to more than 117 percent in the past three months. This means that the fund now has a financial reserve of 17 percent, on top of the assets needed for future payments: the liabilities.
Pensioenfonds Zorg en Welzijn and the metal funds PMT and PME also all saw their funding ratios rise, to around 110 percent.
At the same time, this increases the chance that pensions will be increased this year. To the joy of retirees, who have been waiting for this for years, and of the chairmen of pension funds, who are happy to accommodate this group. “As soon as it can be done responsibly, we want nothing more,” says Eric Uijen of PME. Groceries are becoming significantly more expensive and household energy bills have exploded.
Increase possible this year already
From July 1, the rules for pension increases will be relaxed, in the run-up to the major system overhaul that funds expect to implement around 2026. Funds that express the intention to switch completely to this new system may now apply broader rules.
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Until now, pension funds could only make a small inflation correction if their funding ratio over the past twelve months was on average 110 percent. That limit goes to 105 percent. Larger amounts may then also be distributed. ABP and PME have now passed this new lower limit, while Zorg en Welzijn and PMT have just barely passed.
Although the funds are all happy to take advantage of this easing, they still have a lot to do. After all, they are obliged to motivate that the pension increase they implement is in the interest of all participants.
After a large pension increase, less money remains in the coffers for younger generations. Funds must show this effect numerically. That is why Uijen of PME “heartily hopes” that a pension increase is possible, but adds that it must be “balanced” “for all generations, so for young and old.”