Dutch pension fund Hoogovens (PFH) has shared its bridging plan for the transition period until the new pension scheme is introduced, outlining its plans to make use of the more flexible rules for pension increases.

In the run-up to the new Dutch pension system, pension funds will be allowed to make use of more flexible rules for increasing pensions if its social partners want to convert the accrued pensions to the new pension scheme during the transition to the new pension system.

PFH confirmed that the social partners, Tata Steel and the trade unions, supported by the Association of Former Hoogovens Employees (VOHM), have asked the pension fund to make use of the more flexible rules in order to be able to increase pensions as much as possible.

However, in order to be able to make use of the more flexible rules, the scheme is legally obliged to submit a bridging plan to the Dutch Central Bank, which will be updated annually.

This transition plan confirmed that the PFH board is sticking to the existing policy, which is based on increasing pensions as much as possible within the statutory possibilities.

However, this is subject to the condition that the funding ratio must not fall below 105 per cent after the pensions have been increased.

If the policy funding ratio falls below 105 per cent at any time, the pension fund must reduce the pensions, so that the funding ratio returns to 105 per cent.

Whilst the legal minimum coverage ratio is 95 per cent, the PFH board said it opted for a higher ratio at 105 per cent based on current insights to switch to the new pension scheme.

In particular, the board confirmed that the chosen minimum coverage ratio is the same coverage ratio that, according to its policy, must remain at least after pension increases have been granted.

The scheme confirmed that it has looked at the consequences for the financial situation if it make use of the more flexible rules, acknowledging that this would result in less money to deal with financial setbacks.

However, it argued that the chance of a reduction remains small, because our financial situation is good, estimating that the funding ratio will be higher than the chosen minimum entry coverage ratio of 105 per cent when switching to the new pension scheme.

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