Sufficient money available
As a pension fund, you need to have sufficient money available to be able to pay out current and future pensions. That's the case at Bpf Koopvaardij. We're a solid fund. Over the past year we achieved a 14.4% return on our investments. Nevertheless, according to the standards of the Dutch Central Bank (DNB), we have insufficient financial reserves. That is why we had to submit a recovery plan to this regulator at the beginning of this year. We'll explain.
What does such a plan involve?
A recovery plan mainly consists of calculations. As a pension fund, you show the DNB how you can improve your financial situation within ten years. In our recovery plan, we do not assume that this will require an increase in contributions or a reduction in pension benefits.
Why do we need a recovery plan?
In the Netherlands, the financial position of pension funds has to meet strict requirements. The main factor is the policy funding ratio of a fund. This is the ratio between the money that a fund has and the money that is paid out now and later in pension benefits, averaged over the past twelve months. If that ratio is 100%, then the fund has just enough to pay the pension obligations. But there's no buffer to absorb economic downturns.
Follow current reporting on our funding ratio here www.koopvaardij.nl/en/funding-ratio
How much should the funding ratio be?
At the end of 2019, our policy funding ratio for that year was 112.2%. This means that for every € 100 that is paid out in pension (now and in the future), you have € 12.20 left over as a buffer. Nevertheless, we did not meet the legally required funding ratio of 112.6%. Not a huge difference, but even so, a higher funding ration is, of course, always better. At 125%, for example, you can decide to allow all pensions to fully increase in line with the cost of living. The historically low interest rate is to a large extent the culprit. The lower the interest rate, the more money pension funds need to have available and the more pressure this puts on the funding ratio. Even good investment results could not reverse that situation in the past year.
What does it mean for you?
For the time being, there are no consequences for your contribution or your pension. At least, that was our opinion before the coronavirus outbreak. Whether this crisis will have a major impact on our financial position is difficult to predict. It also depends on how quickly the global economy recovers. In any event, our board is keeping a close eye on developments and will adjust its policy if necessary.←