PostNL, the Dutch postal service, has set out a series of measures to deal with a massive pension shortfall, including non-payment of dividends, cuts to the investment budget and negotiations to cut pension contributions.
It says the current arrangement has become untenable since turbulent financial markets caused the coverage ratio of its largest pension fund to drop to 9 per cent, and under-funding increased to almost 500 million euros by the end of September 2011.
For an average employee, PostNL pays a regular premium contribution of about 35 per cent to the pension fund. Other companies in the Netherlands pay a premium contribution of between 20 and 25 per cent on average. Most of its employees do not personally pay a premium contribution to the pension fund. There is no cap on PostNL’s obligation to top up the pension deficit.
Under the current arrangement, PostNL will need to supplement its share of the pension fund deficit within a period of three years.
Lower coverage ratios caused primarily by the low interest rate will also lead to an increase in the regular premium contributions the company has to pay. In addition, the share price of TNT Express, in which PostNL retained a 29.9 per cent stake after the demerger of the businesses earlier this year, has declined significantly.
Harry Koorstra, chief executive, said: “PostNL will enter into a dialogue with the pension funds and the trade unions to discuss changes to the pension arrangements. The current arrangements put too much financial pressure on the company.”