NETHERLANDS - Dutch pension funds have been forced to increase premiums and reduce indexation levels in order to bolster their financial position, according to the Dutch Association of Industry-wide Pension Funds (VB).
Premium levels at industry-wide funds rose by 17% on an average as at January 1, 2004, while indexation levels were restricted to 1.6% on an average.
“Their financial ratios had been pressured by the rising wage levels of the late 1990s, low interest rates, falling share prices and low premiums,” the association said.
However, the VB-affiliated funds are on a “cautious recovery trend” after reporting coverage ratios of 111.2% on average at year-end 2003.
Some 80% of the pension funds affiliated to the VB have set premiums for 2004 at cost-covering levels or higher, representing two-thirds of the 4.6m active pension scheme members. Premiums, at 16 funds having a combined 1.3m members, still fall short of cost price.
“Most have raised premiums substantially towards cost-covering levels and made arrangements to cover costs fully in the near term, or have an good cover ratio. On the whole they have maintained full index-linking on pension payouts, or reduced indexation levels by only a small percentage,” the association said.
Pension levels at industry-wide funds rose by an index-linked margin of 1.6% on average at 1 January 2004, after adjustment for recipient numbers.
Some 97% of these pension recipients have been awarded pension increases in 2004 to some extent in line with price or earnings indices. The pensions of 32,000 recipients have remained at 2003 levels.
Full index-linking was maintained by one in three of the VB funds (200,000 pensioners). This group of pensioners received increases of 2.0%. Most funds link pension levels to either a price or an earnings index1. The deducted consumer price index for 2003 was 1.9%.
VB director Peter Borgdorff (pictured) said: “In the coming years, most pension funds will not be able to achieve full indexation because they will have to attain coverage levels of 130%. Pension premiums are also bound to rise as a result of the new regulations.”
A suite of liability driven investment (LDI) indices has been launched by STOXX and RiskFirst to aid trustees and consultants select, monitor and challenge managers.
British Airways and the trustees of one of its pension schemes are set to argue over the purpose of a pension scheme, leading to an impactful judgment for DB pensions. James Phillips explores the issue
Bank of England governor Mark Carney has said there is still a lot of data to consider before the Monetary Policy Committee (MPC) can decide when to next hike interest rates.
Savers are not squandering their tax-free lump sums under Freedom and Choice but are taking a more cautious approach to retirement, according to Prudential research.