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Yawning deficits force Dutch pension funds to cut payouts
For years, the Dutch government and many business systematically underfunded their employee pension plans, relying on high investment returns to make up the shortfall. Now, a combination of record low rates, sluggish economic growth and lives that last far longer than anyone imagined even a decade ago have resulted in yawning deficits. At the end of 2012, the funds were 30bn euro short of what is needed to cover promised benefits. Bas Jacobs, professor Economics of the Erasmus School of Economics, talks about this in the Financial Times of Monday May 27th.
Some Dutch analysts criticize the new rules as gimmickry that will waken the plans. "Tweaking the discount rate is just a bookkeeping trick to bring down liabilities", said Bas Jacobs. While figures using the new discount rate show the pension sector as a whole has just enough assets to meet its liabilities, Mr Jacobs said he "wouldn't be surprised if the pension plans actually had a shortfall of 100bn-200bn euro".