Rising interest rates could disrupt the 2027 transition to the new Dutch pension system

Pension funds switching to the new pension system on January 1 next year could find themselves in a complicated position, Financieele Dagblad (FD) reports. The funds could face a risk that the plans they have for dividing assets among participants will no longer be accurate, forcing them back into negotiations with partners.

“We are seeing an economic situation that has not yet been taken into account,” investment consultant Kjeld Frints told FD. “Interest rates affect the extent to which participants gain or lose from the transition to the new system.”

Frints wrote in a report that although many pension funds have already gained an approval from the supervisory body, De Nederlandsche Bank (DNB). However, the situation could still become tense because rising interest rates may invalidate the original asset-allocation plans.

A stronger financial position gives pension funds more assets to allocate when they move to the new system, which Frints called a “luxury problem” that benefits participants. But if the funding ratio climbs so high that the agreed allocation formula no longer produces an acceptable outcome, funds must recalculate and may need to renegotiate with employers and unions.

The transition is the largest financial operation in Dutch history. Unlike many other countries, the Netherlands is transferring all existing accrued rights and benefits already in payment into the new system.

De Nederlandse Bank has already received indications from several funds that shifting economic conditions could render their original calculations unusable. ABP, the country’s largest pension fund, and PME both told the newspaper they are monitoring the situation. Both plan to switch on January 1, 2027, and say they do not currently expect rising rates to create problems.