SPF will not reduce pensions in 2021. However, unfortunately it will also be impossible to increase pensions and bring them in line with wage raises and inflation in a process known as ‘indexation’.
Unfortunately, no increase
SPF strives to increase your pension every year in line with inflation or wage rises. The financial position of the fund and the statutory regulations that apply to indexation play a major role during the annual decision-making process in this regard. The financial position of the pension fund is expressed in the funding level.
The funding level is the ratio between the capital of a pension fund and all its current and future pension obligations. Partial or full indexation may be applied only when this ratio is at least 110%. Unfortunately, as the funding level of 103.3% as at December 31, 2020 was below this minimum of 110%, it will not be possible to grant indexation. For this reason, the Board has decided not to index pensions in 2021. If the financial situation does not improve, there is a chance that no partial or full indexation will be granted in the coming years.
As there will be no indexation, no pensions of any members will increase. This concerns the pensions currently being paid, but also those that employees are accruing for the future. The decision not to apply indexation – something that SPF could not avoid – reduces the purchasing power of pensions. When, for example, average prices rise by 2% a year (inflation) and no indexation is applied during a ten-year period, then your pension will be worth about 20% less after these ten years. Although you will not receive lower benefits, you will be able to buy less with the same amount of money.
For more information about SPF’s indexation, please click here.
If you are still accruing your pension and wish to find out more about the consequences of non-indexation for your pension then surf to the SPF website and log in to ‘My SPF Pension’.
If you would like to see how your pension has been indexed in recent years, please click here.
Fortunately, curtailments are not necessary either
As was the case last year, the Board has drawn up a recovery plan for this year. This plan will be finalized in March. On the basis of the calculations in the recovery plan, SPF expects that the funding level can be restored to the required level without pension curtailments. This has resulted in the Board’s decision not to reduce (curtail) pensions as from January 1, 2021. A number of factors including developments in the funding level determine whether pensions will need to be curtailed or can be indexed next year. These developments in the funding level are in turn partly dependent on movements on the financial markets.
For more information about SPF’s recovery plan, please click here.