Dutch pension fund ABP returned 6.2% in 2020

On the 01/25/21 at 7:32AM


Laurence Pochard

After a rough first quarter, the largest Dutch pension scheme staged a comeback and solidified its coverage ratio.

2020 turned out to be not all that bad. Several Dutch pension funds had almost resigned themselves to lowering their beneficiaries’ pensions because of low coverage ratios, including ABP, the fund of civil servants and educators. Such was not the case, thanks to satisfactory returns on the full year. ABP’s assets under management rose in spite of poor market conditions, from €466bn to €493bn in 2020. The full-year return came to 6.2%. The top quarterly returns were in the second (7.4%) and fourth (6.6%) quarters.

The pension fund’s coverage ratio – i.e., the ratio between its cash and the funds needed to pay out its pensions – had plunged from 97.8% to 82% in the first quarter of 2020 but then rose back to end the year at 93.2%. As the bar for cutting pensions is 90% (vs. 104% normally, but the bar was adjusted in reaction to the exceptional circumstances), beneficiaries will see no change in 2021.

“An increase in pensions is highly unlikely and the chances of reductions remain real for the foreseeable future”, said ABP’s chairman of the board, Corien Wortmann-Kool. “Together with other large funds, we are working hard on a new pension contract for 2026, one in which interest rates will play a smaller role so that we can raise pensions earlier once the economy improves.” Even so, some points must still be ironed out, and she called on the supervising minister to provide clarity on the rules for the period up to 2026.