The pension system will be significantly reformed in the coming years. To be well prepared for this, funds need to have sufficient funds in cash.
“We must maintain sufficient reserves so that we can make a healthy transition to the new pension system in 2027,” says Harmen van Wegenen, head of the Civil Servants Fund ABP, the largest fund in the Netherlands. “We want to increase pensions and keep them in line with inflation, but it has to be responsible.”
The call for a significant pension increase. For many years, pensions were not increased or barely increased, despite the presence of inflation.
Last year, many funds were able to increase again for the first time in years. For example, ABP achieved a 12 percent increase. However, many retirees want a new raise, because life has also become more expensive this year.
In addition to changes in the pension system, the increase also depends on the coverage ratio of the funds. This coverage ratio shows whether the fund is able to meet future obligations. The coverage ratio must be at least 105 percent to be allowed to increase.
The five main funds – in addition to ABP, the healthcare fund PFZW, bpfBOUW, and the metals funds PME and PMT – saw their coverage ratios increase to at least 114 percent in the third quarter. This is more than enough to increase. The extreme case is the bpfBOUW Construction Fund, which has a coverage ratio of 128.8 percent.
Although the funds have incurred losses on their investments, interest rates have risen and this is beneficial for the funds. They have to put less money aside because of higher interest rates.
The funds will decide over the next month whether to actually increase retirement benefits, and if so, by how much.
