ABP submits its first bridging plan to DNB

Dutch pension fund, ABP, has submitted its first bridging plan to De Nederlandsche Bank (DNB), setting out how it will ensure it has sufficient assets as it transitions to the new pension system in 2027.

Pension funds are required to submit bridging plans to DNB every year until they switch to the new system. The plans require pension funds to calculate and describe their financial situation for the period until they transition.

In ABP’s case, its accountability board advised positively on the plan, and the submission now means that it can start applying the contribution and indexation policy it had previously established. The pension fund is to pursue a broader indexation policy until the time of the switch.

ABP will be allowed to increase pensions if its funding level is 110 per cent or higher, and its policy coverage ratio is at least 105 per cent. The fund said it will let members know at the end of 2024 about possible increases, or decreases, to pensions from 1 January 2025.

“We want the coverage ratio to be at least 101.5 per cent when we switch to the renewed pension plan on 1 January 2027. We call this the recovery coverage ratio. Every year, we use the current funding ratio to calculate how high the funding ratio will be on 1 January 2027. If the calculation shows that we will not achieve this coverage ratio of at least 101.5 per cent, we will have to reduce pensions. The calculation from the 2024 bridging plan shows that we do not have to reduce pensions now,” ABP stated.

The pension fund explained that it has already been allowed to use more lenient rules to increase pensions since 2022, and this bridging plans allows the fund to continue with this.

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