March 16, 2020 / 9:02 AM / 21 days ago

Coronavirus pushes big Dutch funds back toward pension cuts

AMSTERDAM, March 16 (Reuters) - The fall in interest rates caused by the global coronavirus outbreak has pushed the Dutch pension fund system back into crisis, with the largest fund, ABP, warning on Monday it would have to cut pensions in 2021 at current solvency levels.

ABP, which holds 459 billion euros ($513 billion) in assets for civil servants, said its coverage ratio of assets to liabilities slid to 88.7% in February from 94.1% in January.

Lower rates lead to higher liabilities, though falling asset prices also hurt solvency, ABP said. Other major funds are expected to issue updates later on Monday.

Under the current system, funds are required to cut pension payouts if their coverage ratio is lower than 95% at year-end, though last year Prime Minister Mark Butte’s centrist government ordered a one-year grace period amid pensioner anger and with an eye to national elections due in March 2021.

“It’s clear that the chance of cuts is present,” the fund said in a statement on Monday.

The government, labour unions and pension funds are in talks on major changes to the Dutch system, considered one of the world’s best, in which pension participants would give up guarantees in favour of “ambitions” and premiums would rise. ($1 = 0.8949 euros) (Reporting by Toby Sterling, editing by Louise Heavens)

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