“With our current coverage ratio, we obviously had no choice,” a PME spokesperson explains the full indexation. “Last year it was a different story.” At that time, inflation was 3.56 percent (measured from September 2023 to September 2024) and PME had to disappoint participants with an increase of 0.3 percent.
PME is now in a much better position. While the coverage ratio was 112.5 percent a year ago, it has now risen to 125.2 percent. This means that the fund can fully increase the pensions of approximately 630,000 participants. The participants include approximately 170,000 retirees.
PME
PME is the first major fund to announce the extent to which pensions will increase. The fund for civil servants, ABP, will follow later. Other large funds, such as the construction and healthcare funds, will no longer make an indexation decision this year. They will switch to the new system on January 1, 2026. ABP and PME do this a year later.
Distribution of pension fund assets leads to tensions: ‘Elderly people will find this unfair’
It is expected that participants of funds that ‘enter’ in January 2026 will make significant progress. Pension funds release certain buffers when switching and distribute the released assets among participants. It also helps that the financial position of pension funds has improved considerably recently.
According to PME, the expectation that other funds will be able to significantly increase pensions due to the system change did not play a role in the decision to fully index. The fund only looked at its own coverage ratio, the fund spokesperson said.
Enter
Chairman Alae Laghrich is pleased with the full indexation and is already preparing for 2027, when the fund will switch to the new system. “It is difficult to predict how the financial markets will develop in the intervening period. This also applies to PME’s coverage ratio. And that is important, because that position determines how exactly we can distribute the assets.”
Pensions are rising sharply, but experts warn against too much optimism: ‘You shouldn’t count yourself rich yet’
However, Laghrich says he is “positively inclined” towards the entry date and points to the healthy financial position of the fund. PME also takes measures to protect the coverage ratio. In this way, the interest rate is hedged, limiting the effect of interest rate shocks on the coverage ratio.