NETHERLANDS – Stichting Pensioenfonds ABP, the Dutch civil service pension fund, has put some ideas on the table about how to reduce the cost of pensions.

ABP director Jaap Maasen, speaking in a Dutch newspaper interview, highlighted the danger of continually raising premiums, and spoke of possible alternative measures.

Marcel Vleugels, a spokesman at ABP, confirmed that other means of reducing costs had been put to the employer and employee representatives for them to mull over in the coming months.

Explained Vleugels: “We already raised premiums by 2% this year, and these premiums could go up further, but there is a limit. Premiums could become too expensive and many would rather eave the pensions system. If times change of course then premiums can easily be reduced, but other action is needed, and options have been put forward.”

One possibility suggested by ABP is a change in the way pensions are linked to wages. Currently the two million people working for the Dutch government receive pensions payouts linked to their final salary. It has now been suggested that payouts could be based on 70% of the average salary throughout the term of service.

A second option would be to encourage employees to work beyond the age of 61 (this is the current average age at which government employees take retirement - although retirement can be taken between 55 and 65).

Vleugels said Maasen had “put some options on the desk”, but it will be up to the employer and employee representatives to decide how best to tackle the issue of cutting costs.

ABP is the largest pension fund in Europe, but, as a result of stock market slumps, suffered a 7.2% decline in its investments in 2002, taking its capital value to 135.5 billion euros, down from 147 billion euros a year earlier. The result has been a decline in its coverage ratio to 103% as at the end of 2002, from 122% a year earlier. The Dutch pensions watchdog, PVK, is asking Dutch schemes to keep their coverage ratio at a minimum of 105%.