Causes and consequences of a low coverage rate among pension funds
Back in the day when you turned 65, you were entitled to a pension. The money was saved by the employee and your employer. When you were 65, you were able to stop working and make use of the monthly allowance that you had accrued at the pension fund.
Most employees build a pension through an employer. The money saved by the employer and employee is managed by a pension fund. The retirement age will be gradually increased to 67 years in 2023. #coronavirus #pensioen #pensioenfonds #financien #geldzaken #geld
What does the coverage rate mean?
What you have built up in retirement over all these years has to be paid out by the pension fund once. The funding ratio indicates whether a pension fund can meet those obligations. The ratio between the existing assets of the pension fund and the value of all accrued pensions at a given date.
The funding ratio of the large pension funds is not good. Most pension funds have a funding ratio below 100%. With a funding ratio of 100%, a pension fund can meet all its obligations. According to the law, pension funds must have a coverage rate of 105%, so that they have enough money to cope with unforeseeable blows. According to economists, a good pension fund should have a coverage rate of 125%.
What if the coverage rate is too low?
Loading full article...
