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Koolmees is discussing possible discounts with the pension sector

2019-09-05T16:47:02.675Z

Social Affairs Minister Wouter Koolmees will consult with the pension sector and regulator De Nederlandsche Bank (DNB) to discuss the imminent pension cuts, it appeared during a debate in the Lower House on Thursday.


Social Affairs Minister Wouter Koolmees will consult with the pension sector and regulator De Nederlandsche Bank (DNB) to discuss the imminent pension cuts, it appeared during a debate in the Lower House on Thursday.

As expected, Koolmees gave no guarantees about the prevention of discounts.

The minister was instructed by the House to investigate the effect of a long period of low interest rates on the pension system.

The financial problems of many funds are partly due to the low interest rates on the capital market.

Second Chamber was powerless

The House of Representatives was powerless in the debate about imminent pension cuts.

Opposition parties PVV, SP and 50PLUS asked for an increase in the so-called discount rate, the percentage by which pension funds must value their assets. The parties have been asking for this in vain for years. The actuarial interest rate is not in line with the actual return, which means that pension funds count themselves poor, according to PVV, SP and 50PLUS.

The actuarial interest has recently been lowered by a special committee, which has further worsened the financial position of pension funds.

GroenLinks and PvdA were in a difficult package. The opposition parties supported the recently concluded Pension Agreement and therefore could not completely oppose the policy pursued. She insisted that Koolmees avoid "unnecessary discounts".

Coalition parties VVD, CDA and D66 (ChristenUnie was not present at the debate) mainly had questions about the technical aspects of the Pension Agreement, knowing that the government cannot and will not prevent impending discounts.

D66 MP Steven van Weyenberg hinted that the government could adjust the purchasing power of the elderly on Prince's Day. That alone is not a sustainable solution.

Pension discounts threaten with millions of participants

Pension funds that have their assets below a certain minimum for a period of five years must implement discounts. They can spread those discounts over ten years.

This limit was reached in 2020 for a number of funds. It does not look like the financial situation will improve so much during the remaining months of this year that the discounts will be gone. The Pension Federation, the interest organization for pension funds, even concluded on Thursday that all signals are "deep red".

Debate has only become more urgent last year

The debate was requested more than a year ago by 50PLUS, but ended up on the long list of 'thirty-member debates' for which there is no majority in the House. Coalition parties VVD, CDA, D66 and ChristenUnie saw no benefit at the time.

Meanwhile, the urgency only increased. Due to the extremely low interest rates on the capital market and the disappointing stock markets, pension funds are only seeing their returns deteriorate.

Because a large part of the funds have not been in good shape for years, from 2020 there will be discounts for millions of participants. This applies in particular to large pension funds such as ABP (government and education), PFZW (health care), PMT and PME (both metal).

The Pension Agreement cannot change much about that. With the new agreements, funds may maintain lower buffers, which may postpone cutting pensions, but the financial situation is currently so bad that in some cases discounts are only mitigated.

Source: nunl

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