Nederlands
The interest rate has been extremely low for years. This can be good news for homebuyers, who benefit from cheap mortgages, or entrepreneurs, who can invest more easily. It also means the Dutch state can also borrow money cheaply. But this has an extremely negative impact on savers, employees accruing pension, and pensioners themselves. How?
Low interest rate, low coverage ratio
Anyone who saves money will have noticed it on their bank account: their savings barely earn any interest anymore. The low interest rate is also very problematic for pension funds. If you are a member of a pension fund, you 'save' for your pension. You put money aside for later. And the pension fund does everything it can to ensure the highest possible benefit for that money when you retire. To do this, the fund has to do two things: keep its finger on the pulse while looking very far into the future.
Pension funds use the coverage ratio to keep their finger on the pulse. This indicates how the fund is faring financially. The coverage ratio indicates whether there is enough money to pay the pensions accrued so far, both now and in the future. The fund's actuaries look far into the future. They calculate (on the basis of the expected interest rate and life expectancy) how much money is needed now in order to be able to pay everything later. These are the obligations.
Setting aside a lot of money for later
If the interest rates are low, those obligations could pose a problem. Because if the interest rate is low, the fund has to set aside more money in order to be able to pay the benefits in the future. It is very difficult to keep pace with that effect by achieving a higher return on investments.
This has led to a strange situation: pension funds have a lot of money in their pockets but are not in such a good financial position, as they need even more money in order to pay all pensions in the future. This has risen faster than the value of their investments.
How does this affect your pension?
The coverage ratio remains low if the interest rate is low. And if the coverage ratio is low, a pension fund is not allowed to pay out an annual increase on top of the pension that everyone accrues or has accrued through their work. As a result, pensions do not increase in line with prices. And that affects everyone, be that employees, former employees, or pensioners. Pensioners notice this directly in their wallet, as they can buy less and less from the same pension. If things get very bad, a pension fund will even have to reduce the accrued pensions or the pensions being paid out. Fortunately, this is not the case at our fund.
The fund’s financial position
If you would like to know how our fund is doing, read more background information and view the current financial position in this graph. If you have any questions, please ask our employees. We would be happy to help!