Dutch pension fund ABP will not give indexation to the pensions of active members and retirees in the government and education sectors in 2012, although the pension premium will remain unchanged. If the financial position of the fund does not improve, the board will have to decide which further measurements are necessary.

The pension fund for public sector workers had a coverage ratio of 94 per cent at the end of October 2011.This is mainly caused by the low interest rate, which is used to calculate the liabilities, as the assets remain mostly stable, despite volatile financial markets. Because of the current financial position of ABP, the pensions cannot be linked to wage growth, which was on average 0.25 per cent in 2011.

The pension premium on 1 January 2012 will be 21.9 per cent (including the temporary recovery raise of one per cent), of which 70 per cent is paid by the employer and 30 per cent by the employee.

According to ABP’s recovery plan, the pension fund’s coverage ratio should be at least 104.5 per cent at the beginning of 2014. At the beginning of 2012 the trustee board will decide again if the financial position is developing according to plan. If the position has not improved by then, the temporary recovery raise will be increased from one per cent to three per cent in 2012.

At the same time, the board will decide on any further actions necessary, like increasing the premium even further or cutting benefits of pensioners and the pension agreements of active members. In case the trustee board decides on a reduction of benefits, this will be carried out from April 2013 onwards.

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