7.5 million employees and pensioners will see their pensions drop over the next couple of years after 103 Dutch pension funds announced yesterday that they will have to slash benefits 

The cuts will start to take effect from 1 April 2013 in order to deal with insufficient financial coverage ratios, a consequence of the current economic climate.

The schemes have announced the measures in order to meet the minimal coverage ratio of 105% - required by the Dutch Central Bank for all funds - by the end of 2013. However, as markets and interest rates move, there is still hope that the schemes' balance sheets might recover before cuts have to take place. 

Eight pension funds have had to agree with the Dutch Central Bank (DNB) that they will start lowering pensions as early as 1 April of this year.

Some schemes have had to announce cuts to their pensions for the third time in a row; SPT, the dentists' pension scheme had to announce a 10% cut last year, 3.2% for this year and 2.2% for 2013 – just below the average of 2.3%.

Many of them are smaller schemes, who have been unable to buffer the effects of the European financial downturn. Poseidon for example, the scheme that arranges pensions for high earners in the metal and electrical engineering Industry, which has almost 3,500 members according to Pension Funds Online, had already announced that it would cut its pensions by 10% in 2012.

Dutch schemes can limit cuts to 7%, even if it will then take them longer to recover. However, of the 34 pension schemes which required cuts of 7% or more, only 15 funds have opted for the pensioner-friendlier option.

The Pensioenfederatie, an organisation representing the pensions industry has published a list of all funds taking the precautions, which can be found here.

azeevalkink@wilmington.co.uk 

First published 21.02.2012