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Will your pension go down next year?

Having a lot of money in hand and yet no higher pensions: this has been a reality for many pension funds and their participants for years. Biggest culprit? The extremely low interest rate. As a result, pension funds must maintain large reserves for current and future pension benefits. But does that mean that your pension will be reduced next year?

 

Cover ratio

With a coverage ratio of 100 percent, a pension fund has just enough money to pay out all the pensions. Unfortunately, many pension funds have a lower funding ratio. As a last resort, pension funds must then reduce their pensions in order to restore the balance between assets and liabilities.

Pension reduction

Last year, Minister Koolmees of Social Affairs and Employment allowed this minimum funding ratio to be temporarily lowered. Pension funds did not have to reduce pensions if the coverage ratio was at least 90 percent at the end of the year. The minister has taken the same decision for 2020. So is the funding ratio lower than 31 percent on December 2020, 90? Then the pensions will have to be reduced next year. Otherwise not.

Bright spot

An important factor for the funding ratio is life expectancy. The longer we live, the more pension we should receive and the greater the reserves of pension funds should be. New figures on life expectancy have recently been published: on average, we live slightly less long than assumed in 2018. As a result, pension funds need to hold fewer reserves, which improves the funding ratio slightly. For funds with a funding ratio of approximately 90 percent, this could mean the difference between a pension and no pension reduction in 2021.

New system

In the Speech from the Throne, King Willem-Alexander said that pensions will eventually become 'more personal and transparent'. 'By reforming now, there can soon be a good pension for everyone.' With this he refers to the pension agreement and the innovations of the current pension system. The cabinet hopes to submit a bill for this in 2021. You can read more about the pension agreement here.

More information

Questions about pension discounts or the upcoming innovations? Or are you worried about your pension? Do not hesitate to contact us. Our Service Center is available every working day from 8.00:18.00 am to XNUMX:XNUMX pm via sc@unie.nl and 0345 851 963.

 

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