Pension contributions and pension build-up fall in 2014

Statistical News Release
Date 20 February 2014

Pension contributions for 2014 are down for the first time in a long period, according to a survey among 25 large pension funds conducted by De Nederlandsche Bank (DNB). This decline partly reflects a lower pension accrual rate for 2014. Also, a few more pension funds than in 2013 were able to increase pension rights and benefits for 2014.

DNB conducts a survey of pension contributions and indexation on an annual basis. This survey is held among 25 large pension funds representing about three-quarters of the total number of active pension scheme members and pensioners. The Netherlands Bureau for Economic Policy Analysis (CPB) uses the results to determine purchasing power developments in the current and previous years. 
 
Pension contributions
Total 2014 pension contributions amount to 17.6% of salary, down from 19.2% in 2013. The decline in employers' pension contributions is especially sharp, from 12.5% to 11.2% of salary. The strongest decline was recorded by company pension funds. The employer's contribution has always been considerably higher at these funds than at industry-wide pension funds.
 
The decline in pension contributions reflects a reduction in pension accrual rates by various pension funds. The pension accrual rate is the annual rate at which pensions are built up. The maximum tax-deductible accrual rate under average pay schemes was lowered from 2.25% to 2.15% effective from 1 January 2014. This is one reason why the average accrual rate is at 1,93% in 2014, from 1.99% in 2013. 
 
Chart 1: Pension contributions as a percentage of salary

Pension contributions as a percentage of salary

Indexation
Due to the financial position of pension funds, pension rights and benefits have not fully kept up with wage and price developments for a long time. 2014 indexation is greater than in preceding years. Our survey shows that, on average, the 2014 pension rights of active members rise by 0.4%. Average indexation for pensioners and deferred members stands at 0.2%. In 2013, pensioners were awarded average indexation of 0.1%. On average, active members were awarded no indexation in 2013.
 
Our survey provides an overview of both actual indexation and indexation targets, in most cases, a level that compensates for wage and price increases. The 2014 indexation targets for active members and pensioners are 1.2% and 1.1%, respectively. As a result of the moderate increases in wages and prices combined with the above indexation, the 2014 indexation arrears will be lower than in previous years. The total indexation arrears have accumulated to approximately 9 percent since 2007.