The Board expects 2021 to be a year of transition for pension management as we move toward a new pension system. The government, together with social partners (employer federations and trade unions) in The Hague have concluded a pension agreement and that calls for further development of a new pension contract. It is estimated that during ongoing negotiations between the parties involved, changes in legislation and regulations, and any developments will be limited in scope.
The implementation of the pension agreement will take shape in the coming period, with consultation being held during pension meetings with trade unions and SABIC, as employer. The implementation of the pension agreement will take shape by formulating the transition plan, implementation plan, and a communication plan with members. The fund stakeholders will be informed in time of any developments in this respect.
The pension agreement is the central theme in the annual plan for 2021, which sets out the components of our fund’s strategy. Other important themes include future-proofing IT, the implementation of an Own Risk Assessment, and socially responsible investing. The Board has already taken steps on these matters in 2020, but they have been further prioritized in 2021.
Mission, vision, and core beliefs
The Board observed that its mission and vision statements are ripe for review. In the first six months of 2021, the fund’s mission, vision, and core beliefs are redetermined by the Board. The development of core beliefs offers the Board various tools to test the implementation of such things as the Pension agreement in the coming years.
In early 2021, the Board decided to adjust the Committee staffing in connection with the departure of Arthur Smit and the appointment to the Board of John van Moorsel. In summary, the following changes were introduced:
In the SPF risk management model, a decision was taken to organize the responsibility for risk management primarily with the first line Committees: The Pension and Communication Committee and the Asset Management Committee. The newly appointed risk advisor, Ben Velzeboer, is advising both Committees.
Balanced decisions are essential to the current pension system. All stakeholders in the fund should experience the decisions taken by the board as being balanced. Judging by the opinion of the Accountability Council and the findings of the Supervisory Board, the stakeholders are seeing the decisions taken as being balanced. These bodies do recommend arguing and substantiating the balance of decisions even more emphatically. ‘I've no doubts that the Board really listens to and takes on this advice.
The funding level increased slightly in early 2021, partly due to interest rate increases. At the end of the first quarter of 2021, the nominal funding level was 110.6% and the policy funding level stood at 100.5%.
COVID-19 and financial markets
The combination of measures by the European Central Bank (EC) and hopeful reports on vaccines are positive signals for further economic recovery in 2021. In response to the rising number of infections due to the COVID-19 pandemic, in 2020 many governments around the world introduced lockdowns and other measures to limit gatherings of people. There are still considerable market uncertainties because of this, and the consequences of governments’ COVID-19 measures on further economic development are difficult to predict. The Board will continue to monitor developments closely.
Search for yield
As in previous years, the low interest rate, regarded within the pension sector as the primary risk for pension fund balance sheets, remains a concern for 2021. Because of the low interest rate, investing in alternative products that generate added value within an acceptable risk profile will also be considered in 2021. This search for yield will be continued in 2021 as it was in 2020.
The Board evaluated the current Socially Responsible Investing policy in 2020 and decided to add several pillars to the pension fund sustainability policy, including engagement. The Board is also investigating the possibility of expanding its voting policy. In the context of the IRBC Agreement, the Board decided on climate change as the themed focus area. Sustainability will again be prominent on Board meeting agendas in 2021. This includes determining ambitions in the context of the climate change theme and the further implementation of this. Compliance with the SFDR Regulation requirements and the IRBC Agreement will also be discussed extensively.
Communication policy from 2020 through 2022
The communication policy for 2020 to 2022 came into force on January 1, 2020. The policy is effective, as is evidenced by various studies and contact moments with members. Where necessary, the policy will be adapted to reflect new insights and developments. Developments in pension communication in the field of communication and technology will be taken into account, as will developments in legislation and external developments, as well as when best practices emerge. Spearheads of the new policy are further digitization and connections with the employer (SABIC).
A member survey is being conducted in spring 2021. The target groups being approached for this survey are members and pensioners.
The new pension contract is an important focus point in the communication. In the first instance, the social partners will be asked to reach agreement and the responsibility for communication about this lies with them. This does not alter the fact that the fund will also need to make choices in the course of 2021.