NETHERLANDS - PMT, the giant pension fund for metal workers, has announced it will not grant its participants any indexation in 2009 because of its considerable funding shortfall.
The industry-wide pension fund for metalworking and mechanical engineering, which had assets of €33bn in July, is raising the contributions required by 1%, to 15.1%, its board and participants' council have decided.
High earners will pay a premium of 17.7% over the part of their salary which exceeds €73,287.
The scheme now has a cover ratio of 86% - 19% short of the required minimum of 105% - and its assets have dropped by almost €7bn to €27.6bn, driven down mainly by decreasing equity markets.
At the same time however, a drop of long-term interest rates, on which liabilities are based, caused a steep rise of liabilities to €32.2bn, PMT added.
PMT's cover ratio was still 116% at the end of the third quarter.
The scheme had already decided to set the "franchise" ceiling - the part of a salary which is excluded from the build-up of a pension - at €15,004.
In a statement, PMT sought to underline its recovery potential, referring to the ratio between its almost 418,000 active participants and its 151,000 pensioners, by arguing the expected €1.8bn in contributions income in 2009 should more than offset the pension benefits which are estimated at €1.2bn.
"This is why we do not expect to need to cut benefits next year," said Annemieke Biesheuvel, spokeswoman for PMT.
The metal scheme granted its workers a 2.36% indexation at the start of 2008, while deferred members and pensioners received compensation for inflation of 2.79%.
PMT is the largest market scheme in the Netherlands in terms of members as it has over a million participants.
The €195bn civil service scheme ABP last week decided to raise its contributions by 0.4%, ahead of a decision on indexation in the middle of December.
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