The Dutch Central Bank (DNB) lowers the discount rate used by pension funds to calculate the value of their future obligations. In practice, this can lead to higher pension contributions.
This makes De Nederlandsche Bank (DNB) announced Tuesday morning. It is an adaptation of the ‘ultimate forward rate’, the interest rate used by pension funds to determine if they have enough cash in hand. At present, the interest rate is 4.2%, but DNB states that the interest rate should be adjusted to more realistic value of 3.3%. This may result in a lower pension coverage and so will have to charge higher premiums to compensate for the defect.
The supervisor that the adjustment will not result in lower pension payments. Or contributions for pensions actually go up, will prove as pension funds determine their premiums for 2016.
At 10:00 DNB a press conference, more information to follow.
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