The Board expects 2022 to be an important year as we move toward a new pension system. It is expected that a bill relating to this will be sent to the House of Representatives prior to the summer. In cooperation with SABIC social partners (employer and trade unions), the fund started the process to develop a new pension contract for SABIC.
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 funding level increased slightly in early 2022, partly due to a rise in interest rates. The nominal funding level was 123.3% by end March and the policy funding level stood at 114.8%.
COVID-19 and financial markets
The combinatioxn of measures by the European Central Bank (ECB), incentive measures from governments, and the high vaccination levels have enabled further economic recovery in 2022.
The further course of the COVID-19 pandemic, the development of new variants, for example, and the consequences of government pandemic measures on further economic development are difficult to predict. The Board will continue to monitor developments closely.
The Russian threat of military action in Ukraine increased in early 2022. After Russia invaded Ukraine on February 24, this had several consequences. SPF only had very limited interests in Russian investments, namely less than 0.03% of assets. This means that the direct impact on the portfolio was minor.
The effects were, however, more drastic on the international markets. The oil price increased significantly, while gas prices rose spectacularly. The Western world united in its response by issuing sanctions against the Russian state, companies, and oligarchs. After an initial decline, stock markets recovered and reached pre-Russian invasion levels. Interest rates continued to rise, fueled by increased inflation expectations.
Whereas the initial expectation was that the rise in inflation was temporary, current thinking is that this may remain at a high level for the next few years.
For the time being, the Board has worked out possible scenarios on the course of the war and has identified possible consequences for the world economy. For 2022 as a whole, it is and remains difficult to predict how the economy will develop and what this will mean for the fund’s policies. The fund has considered various policy options based on the possible scenarios, but decided to adhere to its long-term policy for the time being, due to the uncertainty and unpredictability of the current crisis.
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 2022. Because of the low interest rate, investing in alternative products that generate added value within an acceptable risk profile will also be considered in 2022.
The sustainability policy appeared on several Board meeting agendas in 2021. In the context of the obligations that flow from the SFDR, the Board took various decisions. With respect to SFDR article 8, the Board decided to classify the pension scheme as “light green.” With this, the Board is indicating that the scheme promotes ecological and social characteristics. This classification has two important consequences: From 2022 onward, the pension fund will be required to report on those assets designated as environmentally sustainable according to EU Taxonomy. In addition, when SFDR Level 2 comes into effect (January 1, 2023), SPF must publish more detailed sustainability policy information on its website, in Pension123, and in its annual report. In the context of the obligations from the IMVB covenant, certain requirements will apply as of July 1, 2022. The Board had already set out the necessary actions for this in 2021.
The Board discussed its ambition with respect to climate investments during the October 2021 theme day. This resulted in a number of actions that will be placed on the Board agenda in 2022, including investigating the possibilities of measuring/monitoring the investment portfolio’s carbon emissions and investigating the possibilities of themed investment within the portfolio. A study of the sustainable investment preferences of members, deferred members, and pensioners is also on the agenda for 2022. The outcomes of this will be included in further developing SPF’s sustainability policy.
A member survey was conducted in spring 2021. The target groups approached for this survey were members and pensioners. The study showed that the policy is effective, as was also evidenced by various other 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, external developments, and best practices, when these emerge. The policy priorities are further digitization and connections with the employer (SABIC).
The new pension contract will be an important focus point in communications. In the first instance, the social partners will be asked to reach agreement and the responsibility for communicating about this lies with them. This does not alter the fact that the fund will also need to make choices in the course of 2022. For instance, the Board will need decide on whether the fund will use the transitional financial assessment framework (Transitie FTK).
DSM has informed SPF that it is reconsidering how pension schemes are administered at DSM in the Netherlands. Part of this reflection process is the reappraisal of DPS, the administrator of SPF’s scheme.
The current Service Level Agreement with DPS ends as of December 31, 2023. With this in mind, SPF is already examining how the administration will be carried out after January 1, 2024. As a result of the DPS reappraisal, the Board decided to accelerate the market survey and scenario analysis associated with it. The objective is to safeguard pension administration continuity.