Pension funds' interest rates recalculated, premiums could increase

On Tuesday De Nederlandsche Bank announced that the way in which the interest rate for pension funds is calculated will be adjusted. Pension funds are concerned that this will leave them worse off financially and lead to premium increases for their members, NU reports. According to DNB, this intervention was necessary because of the current low interest rates in Europe. The interest rate for pension funds is beginning to stray to far from the "real interest rate. Pension funds use the interest rate, which was fixed at 4.2 percent, to calculate the value of their future obligations. This rate will no be calculated based on market expectation from the past decade. From Wednesday, the rate will drop to 3.3 percent. As a result DNB expects that the coverage ratio for pension funds will drop by an average of about 3 percent. The coverage ratio indicates to what extend funds are able to meet their obligations. The Pension Federation told NU that they are "deeply disappointed" by DNB's decision. The branch organization believes that this measure will have a large impact, especially on funds with many young members. Union FNV is angry that this will affect the pension participants. According to DNB, because of the new calculation method, the cost-covering pension premium will increase by an average of 4 to 5 percent.