21 pension funds can increase payouts as investment results improve

At least 21 company pension schemes have increased payouts this year by 3% or more, Financieele Dagblad said on Tuesday.

The funds have more leeway to increase the amount they pay out because their coverage ratios have improved, but they are still not able to match the rate of inflation. For example, Philips’ pensions increased by 7.4%, ABN Amro’s by 6.4% and Shell’s by 5.7%, according to the newspaper.

Millions of company pensions have been frozen in recent years because fund assets have not kept pace with their obligations, but the improving investment market and rising interest rates changed the outlook.

Funds are allowed to fully offset inflation if their hedge ratio – their assets to bonds – exceeds a certain level, usually around 125%.

Figures from the Dutch central bank show the average coverage rate was 108% at the end of last year, but had risen to 111% by the end of March.

Pension funds can increase payments if they have a coverage rate of at least 110%, but this rate is reduced to 105% in view of the introduction of a new pension system. In this system, the hedge ratio rule will be replaced by a rule based on average returns.

Thank you for your donation to DutchNews.nl

The DutchNews.nl team would like to thank all the generous readers who have donated over the past few weeks. Your financial support has helped us extend our coverage of the coronavirus crisis into evenings and weekends and ensure you are kept up to date with the latest developments.

DutchNews.nl has been free for 14 years, but without the financial support of our readers, we would not be able to provide you with fair and accurate information on all things Dutch. Your contributions make this possible.

If you haven’t donated yet, but would like to, you can do it via Ideal, credit card or Paypal.