A major pension increase may not be possible next year for millions of Dutch people. The five most important pension funds, with more than 8 million members, are not certain that pensions will increase as of January 1, 2024. This was reported by the ANP news agency on Thursday.
The pension funds do have enough money in their coffers, but are concerned about the transition to the new pension system and the economy. The pension system will be overhauled in the coming years. To be well prepared for this, the funds want to have enough money in cash.
“We must maintain sufficient reserves so that we can move healthily to the new pension scheme in 2027,” said Harmen van Wijnen, chairman of civil servants fund ABP, the largest fund in the Netherlands.
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Enough money
An increase in pensions also depends on the coverage ratio of the funds. Pension funds must have enough money to pay all current and future pension benefits. The coverage ratio must be at least 105 percent to be allowed to increase the pensions.
The five major funds in the Netherlands – ABP, bpfBOUW, healthcare fund PFZW and metal funds PME and PMT – saw their coverage ratios rise to at least 109 percent in the third quarter, more than enough for an increase. Bouwfonds bpfBOUW even has a coverage ratio of 125.2 percent.
However, the question remains whether these high coverage ratios will lead to higher pensions as of January 1 next year. The funds’ investments have lost between 3 and 5 percent in value in the last three months.
In addition points out Van Wijnen on the uncertain economic situation. “Our financial position improved in the third quarter: the current coverage ratio has increased considerably. Whether this will remain the case with the terrible conflict in the Middle East and the ongoing war in Ukraine is very uncertain.”
The funds will decide in the course of next month whether they will indeed increase pension benefits and if so, by how much.