Like many other pension funds, PDN is also suffering from the current low interest rates. Based on the current financial situation, there is a chance that the fund will have to reduce the pension entitlements of and pension payments to all members and pensioners in 2020.
PDN's financial position is expressed in the funding level. Given that we have a funding level of 95% (at the end of August), we are in a bad position at the moment. To calculate the funding level, all assets (the value of the investments) are divided by all future pension liabilities (pension benefits). PDN recently achieved good returns on investments. For the first eight months of this year, the return was 11.17%.
Despite these good investment returns and the fact that we have more money in the coffer than ever before, PDN is not in a good financial position. This is because the fund's pension liabilities saw a dramatic increase from January 1 to September 1. To calculate these liabilities, PDN must use an actuarial interest rate set by the De Nederlandsche Bank. This actuarial interest rate is derived from the market interest rate. As interest rates fell sharply in 2019, so did the actuarial interest rate. This led to a large increase in pension liabilities. After all, the lower the interest rate, the more money the fund has to set aside for pension payments now and in the future.
Political developments
As a result of the fall in interest rates and therefore in the actuarial interest rate, millions of pension fund members in the Netherlands are faced with the possibility of a reduction in their pensions. Minister Koolmees has been asked to take measures to avoid unnecessary cuts to pensions. The results of the political discussions are not yet clear. The minister has promised to submit a detailed response at a later date.
What does a pension reduction in euros mean? What measures has PDN taken so far? When will we know more? Read on to find out the answers to these questions.