Accrual Roundup: Retail Scheme Warns For Accrual Drop To 1%

Employers and workers in the Dutch retail sector have warned social affairs minister Wouter Koolmees that the annual pensions accrual would drop to 1% of the pensionable salary if contributions remain at the current level while costs-covering.

They added that premiums at the €26bn sector pension fund must rise by no less than 47% were the accrual to be maintained at 1.56%.

The maximum tax-facilitated pensions accrual in the Netherlands is 1.875%.

According to the social partners – employer and employee representatives – the accrual drop is necessary if the current contribution level of 22.5% remained unchanged but was made to cover costs.

In order to keep the current pensions accrual, premiums had to be raised to 33.1%, they argued.

A third option would be that contributions are raised and accrual is reduced at the same time, employers and workers said in their letter to the minister.

However, they made clear that they preferred a quick elaboration of the pensions agreement through legislation.

Social partners in other sectors are also worried about the impact of cost-covering contributions, with trade unions warning for a steep accrual drop at the €459bn civil service scheme ABP and asking for a “quick solution”.

The €5.7bn pension fund for the cleaning sector (Schoonmaak) has urged the minister to loosen the discount rules for liabilities.

It said it would have to raise contributions from 22% to 30%, if it wanted to keep accrual at the current level.

A spokesman for trade union FNV, who couldn’t provide further details, said that several other sectors would address the issue in a letter to Koolmees.

He added that approximately 4,000 FNV members had signed a model letter to the minister since the union had launched the initiative last week.

Trade union CNV said that a petition against rights cuts, premium increase and accrual reduction on its website had been signed 24,000 times. 

Accrual at ING CDC scheme to drop by one quarter

The €1.6bn Dutch ING CDC pension fund plans to reduce annual pensions accrual by one quarter, as a result of declining interest rates.

In a message to its participants, it stated that the current accrual rate of 1.738% would be decreased to 1.3% as of next year.

André Hollenkamp, the scheme’s chair, explained that the declining interest rates had driven up the prime cost of pensions, leaving the fixed contribution insufficient for the existing accrual level.

The scheme’s board further warned that next year’s accrual reduction wouldn’t necessarily be the last one.

In September, it is to assess the accrual rate again. It indicated that the possibility existed of a further reduction if interest rates remained at the current low level.

The scheme’s fixed premium amounts to 31.5% of the pensionable salary, and already exceeds the fiscally allowed maximum of 27% expected to be introduced in the new pensions system.

In more bad news for its participants, the pension fund announced that it would not grant an inflation compensation next year.

At September-end its coverage ratio stood at 110%.

The ING CDC pension fund has 14,000 active participants and 359 pensioners.

Earlier, the €31bn pension fund for ABN Amro announced that it would cut annual accrual by 20% to 1.48%.

Several other pension funds, including the Dutch company scheme for Philips, as well as the trade unions for government staff, have warned for looming premium rises and accrual reductions in 2021.

Recently, the multi-sector pension fund PGB said that its contribution had to rise by 4 percentage points to 28% next year.

However, the €29bn scheme indicated that it had postponed the implementation in order to allow employers and workers breathing space for assessing the future of their pension arrangements.

The developments were triggered by the introduction of a lower prescribed discount rate for liabilies next year, the new fiscal ceiling for contributions as well as the requirement of a costs-covering premium in the new pensions system.