Economy

Pension contributions for teachers and civil servants up

This is necessary because otherwise the pension fund will run into problems due to the difficult economy. The corona crisis also has an effect on the financial markets, which in turn has consequences for the investments of pension funds such as ABP.

Low interest, little return

They have also been bothered by low interest rates for years, which means they get less return on their investments. Roughly speaking, there are three solutions to this problem: increasing the contributions paid by workers, not allowing pensions to rise with inflation, or lowering the pension that retirees receive.

ABP has now opted for the first and the second, and the third may also happen, the pension fund reports. ABP is the largest fund in the country with more than 3 million participants.

9 euros less

The increase in premium means that from 1 January teachers or civil servants will pay slightly more premium from their gross salary, and therefore have less net left over. For an average monthly salary of 3,500 euros gross, the increase saves about 9 euros at the bottom of the line, according to the fund.

Incidentally, the measures do not mean that pension cuts have been canceled completely. The chance of this is ‘real’, ABP reports.

Not enough money in cash

The so-called funding ratio is important for this. This percentage expresses whether a pension fund has enough capital to be able to pay all pensions in the future.

If this funding ratio is below 90 percent at the end of this year, ABP will have to cut pensions. There will be certainty about this by mid-February. If a reduction is necessary, this will not happen until July at the earliest.

Cut your pension

The Central Planning Bureau expects that discounts will be inevitable for many pension funds next year, due to the low funding ratios. Half of retirees will face a 2 percent drop in retirement next year, the cabinet’s chief economic advisory body warned.

ABP is not the only large pension fund that is increasing the premium for next year. Pensioenfonds Zorg en Welzijn announced earlier this month that it would increase the premium by 1.5 percentage points to 25 percent next year and again to 25.8 percent in 2022.

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