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.
In March 2020, at the start of the global COVID-19 pandemic, SPF’s actual funding level dropped to a low point of 92.6%, but recovered to 117.3% by late 2021. That is a 24.7 percentage point increase in twenty-one months. This sharp rise was the result of stock market increases and a limited rise in interest rates.
In 2021 and based on the indexation policy, the Board decided to award indexation as of January 1, 2022, to members and pensioners as well as deferred members in line with the fund’s financial situation as at end 2021. The fund is awarding indexation of 14.1% of the maximum benchmark. For members, this means indexation of 0.55% and indexation of 0.46% for deferred members and pensioners.
More information about indexation is available on SPF’s website.