Besides the funding level, a pension fund must calculate the “policy funding level,” being the average of the last twelve months of monthly funding levels. The policy funding level can be used to determine whether a pension fund needs to curtail accrued pensions and pensions that have commenced payment.
The policy funding level can also be used to determine whether a pension fund is in a deficit situation, in which case the pension fund would be required to submit a recovery plan to the Dutch central bank, DNB (De Nederlandsche Bank). The recovery plan outlines how a pension fund aims to achieve a higher funding level in the coming years. The policy funding level plays a decisive role in the fund's decision on whether to index.
Based on the policy funding level, it was possible to partially index in 2018.
SPF tries to increase pensioners’ and deferred members’ pensions annually in order to bring these in line with price increases. We also aim to increase active members’ pensions to bring these in line with wage increases. We refer to this increase as “indexation". However, we can only index if our financial situation is strong enough.
Unfortunately, it is only to a very limited extent that the fund has been able to achieve its ambition of providing indexed pensions. The gap that has gradually emerged has diminished the purchasing power of our pensions and the pension accrual. Provided the financial situation does not deteriorate again, the fund expects to be able to grant increases in part again in due course. Despite the fact that the risk of having to curtail pensions was smaller in 2018, the risk of doing so cannot be ruled out. More information about indexation is available on SPF’s website.