NETHERLANDS - Dutch pensions funds industry wide are in for a tough year as premium revenue falls 3% and tax concessions for early retirement and pre-pension schemes are abolished, the Dutch Association of Industry-wide Pension Funds (VB) has warned.
VB said: “2006 will again be a turbulent year for pension funds. Overall premium revenue is expected to drop from e15.3bn in 2005 to e14.8bn in 2006. As in 2005, employers pay approximately a two-third share of premiums on average, and employees one third.”
Tax breaks for early retirement and pre-pension schemes have also been abolished this year, with the exception of employees born before 1950, and in many sectors funds have opted to compensate employees born after 1950.
VB said this was most commonly achieved by raising accrual percentages and setting lower contribution-free thresholds, thus building up pension rights faster over a larger portion of salary.
“Of the 88 pension funds affiliated to the VB, 38 have taken this route. The impact of these measures on premiums was neutral on average,” VB said.
Pension indexation levels would also be unchanged at an average 75% of full index-linking, while some funds were in a position to award backlog indexation after several years of lagging indexation levels.
Because of the slump on stock markets in recent years, many pension funds were unable to apply full index-linking rates to pensions and accrued pension entitlements, VB said. “Despite a buoyant recovery in coverage ratios in 2005, most pension funds are not yet in a position to meet their full indexation targets.”
Pensioners are on average given 76% of full indexation, compared with 75% last year.
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