Dutch pension fund, ABP, has said it will be very likely reducing pensions in 2020 and the years beyond.

Publishing a statement, the fund said that its coverage ratio fell again in the third quarter of 2019, which has increased the chance of having to reduce pensions next year.

This is due to further fall in interest rates. If the current coverage ratio of ABP on 31 December 2019 falls below 95 per cent, it said it “must reduce pensions in the autumn of 2020”. With the coverage ratio currently standing at 91 per cent, it is below the critical limit.

The fund said that the fall in interest rates led to a further increase in liabilities, and for the first time they exceed €500bn. It said that despite strong returns €17bn, the decline in the coverage ratio could not be prevented.

ABP said that currently a reduction in 2020 would be between 0 per cent and 1.5 per cent. As an example, a pension of €800 a month could be cut by €12 a month. The reduction also affects the pension accrual of working people. In addition, for 2021 and beyond, ABP said there is a high chance of a further reduction.

Commenting, ABP chairperson Corien Wortmann-Kool said: “The interest rate has fallen further in the past quarter. That is bad news for our members. Despite good returns, the coverage ratio has fallen below the critical limit. It looks like we will have to lower pensions next year and it does not look good for the years to come.

“The persistently low interest rate is a reality that we naturally take into account. Furthermore, we invest well and we continue to do so, although future returns are likely to be somewhat lower than in the past 20 years,” she said.

Wortmann-Kool said that she hopes a pension agreement will be implemented soon.

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