Checking my 2 pillar statements, I realized that I was getting a low return. I checked the pension plan rules and I found a table showing what interest I should get at the end of the year based on the coverage ratio and the yearly results. For my fund in 2020, coverage ratio is above 125% and yearly result was just above 3%. From what I found, 125% coverage ratio is above the current average of 115%.
Based on that table I (and all the other employees) should have received 2.25% and instead I only got 1.5%.
I reached out to the pension plan and included the employee representatives to ask for clarification. The answer that I have received from the plan stated that the table that I found was the maximum and because of low expected returns in the future they have decided for 1.5%.
I dug deeper and it looks like lowering the annual rate is possible only if the fund is underfunded or at risk of underfunding. Which clearly isn’t. I’m waiting for an answer from the fund.
It looks to me that the employee representative signed whatever was suggested and that the fund is bending the rules to increase the coverage ratio.
Does somebody have any experience with this?
Any idea why the fund wants to keep an “higher than normal” coverage ratio? Maybe it’s because they lose less fees when somebody leaves/retires.
Is the employer also benefitting from having a high coverage ratio?
I don’t know if it’s going to be possible to make changes but maybe my research will make the employee representatives think before approving next time.
Maybe others are in a similar situation and I wanted to share.