In Context

Pension funds with >90% cover ratio do not have to cut pensions

December 17, 2019

The Dutch government has announced that it will use its exemption powers to extend the deadlines by which pension funds must meet their mandatory and requisite own capital requirements (known in the Netherlands as VEV and MVEV).

In deviation from current rules, pension funds which fail to meet the MVEV funding ratio of 104.3% for the sixth time in a row by the end of 2019 will not have to apply any cuts. The government is granting these funds an additional year to increase their funding ratio to the required 104.3% level. If they have shown insufficient recovery by the end of 2020, the exemption will no longer apply and they will, as a general rule, have to apply cuts in accordance with the current rules.

The government is also extending the deadline for VEV recovery from 10 to 12 years. But this is only an extension; if social partners, pension funds and the government make insufficient progress in implementing the Pension Deal, larger cuts will be needed next year. That is, unless the financial markets show a strong recovery in 2020 or interest rates on the capital markets increase.

This article is only available in Dutch, click here to read it.

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