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10 January 2020 / article

Cuts of pension rights and benefits 2020: granting a one-year reprieve

Social Affairs Minister Wouter Koolmees has granted underfunded pension funds a one-year reprieve from implementing cuts of pension rights and benefits (article 142 Dutch Pensions Act). However, the minimum required funding will be 90%. If the coverage ratio is for example 87%, unconditional cuts must be implemented in order to improve the coverage ratio to 90%.

Pension funds must explain the one-year reprieve

Although the minister explained that social unrest and losing confidence in the future of the Dutch pension system must be prevented, pension funds still required to explain the one-year reprieve. They must clarify the issues of a balanced approach for all their participants and pensioners.

A balanced approach: vague standard Why?

The one-year reprieve has everything to do with the expected new pension system. This new pension contract has to solve the main funding problems of the current pension system. Is the Minster suggesting that preventing unnecessary cuts of pension rights isn’t enough motivation?

Walking on thin ice

This requirement is confusing. The legal meaning of a balanced approach is not very clear either. According to the Dutch Pensions Act this is a very vague standard. So it’s walking on thin ice. One way or another, there are very strong arguments why pension funds must take the opportunity to prevent cuts on the eve of an new pension system. We would like to assist you on these matters.

 



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