Future expected Dutch DC benefits tumble 5% – Aon

The future expected monthly benefit that a Dutch defined contribution (DC) pension pot can buy has fallen by 5 per cent, according to new research by Aon.

Aon’s Pension Comparison found that a 40-year-old worker with a moderate income saw the future pension benefit in this scheme fall from €802 to €764 per month.

The reasons for this are the current low interest rates, which have made the purchase of pensions more expensive, and developments on the stock exchanges. However, Aon warned that more bad news is to come, as these figures do not take into account the impact of Covid-19 on financial markets.

Around one in seven employees are now members of a DC scheme in the Netherlands, with this number set to increase following the finalisation of a new pension agreement between the government and trade unions.

Aon’s Pension Comparison index stood at 104 points at the end of June 2019. As of the end of December 2019 it was 102 points and as of the end of March 2020 the index has fallen further to 97 points.

“The current coronavirus crisis is not yet visible; it will put even more pressure on pensions. Stock prices fell by about 20 per cent in the first quarter. At the same time, interest rates are at an all-time low. The price of purchasing pensions has risen sharply and the index in particular has fallen sharply as a result,” Aon stated.

With regards to defined benefit pensions, Aon said many of them currently have a coverage ratio below 100 per cent. As a result of the pandemic, Aon believes it is almost inevitable that pension cuts will have to be implemented by the end of 2020.

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