Indexation perspective for KLM pilots’ pension scheme changes, other commitments unchanged
KLM cannot pursue the current supplementation scheme for future indexation of the pilots’ pension scheme. KLM is therefore compelled to suspend its STROT (structural surpluses and shortages) protocol with the VNV pilots’ union as well as its implementation agreement with the pension funds effective 1 December 2016.
Owing to the new Financial Assessment Framework (nFTK) of the Dutch central bank DNB, the existing agreements in the STROT protocol, dating from 2001 and 2007, in combination with low interest rates would give rise to a situation wherein a substantial supplementary payment would have to be made into the pension funds.
The STROT protocol and the implementation agreement stipulate that KLM should make a supplementary payment if the cover ratio of the pension fund is insufficient for full indexation. The limit for this cover ratio had been set at 105%.
New legislation, which took effect on 1 January 2015, raised this limit to around 122%. Below this cover ratio, full indexation is impossible, which means KLM must make a supplementary payment if the cover ratio is below 122%. In view of the current financial status of the pension fund, this supplementary payment, which is due in late 2016, could amount to hundreds of millions of euros.
Together with this suspension, KLM presented the VNV with an alternative proposal for the STROT protocol and the implementation agreement. The proposed adjustments will result in a change in indexation perspective. All other pension assurances will be retained intact.