On 31 December 2021, the policy coverage ratio was 111.5%. Partly thanks to our improved financial position, the board decided in January 2022 to increase pensions by 0.23%. The increase took effect from May 2022 with retroactive effect from 1 January 2022.
Due to relaxed legislation, the board of Pensioenfonds PGB decided in July to increase all pensions by 2.77%. This increase comes on top of the previous 0.23% increase. This brings the total increase to 3% in 2022. The additional increase of 2.77% will take effect in October, with retroactive effect from 1 January 2022.
Do you have an average earnings pension scheme with us?
The 3% increase applies to everyone who receives a pension from us, accrues a pension with us or still has one with us.
Please note: if you started accruing pension with us from 2022, this pension is not increased.
Do you have a defined contribution scheme with us?
For example, because you work in the sea fishing or wholesale of flowers and plants sectors? In that case, you accrue pension capital with us and your pension is not dependent on the coverage ratio. This means we will not increase your pension capital. Conversely, we will not reduce your pension if the coverage ratio is too low. Your pension capital increases due to the amount you and your employer pay, and because of the investment return on your pension capital. If we already purchased a pension from your accrued pension capital or if you already receive a pension benefit from us, that pension has increased.
The first 0.23% increase was the maximum we could do within our legal margin at the beginning of this year. From 1 July, the statutory rules have been relaxed, allowing pension funds to increase pensions earlier than before. Our supplement scheme to increase currently has a maximum increase of 3%. As a result, we increased pensions by a maximum of 2.77% in 2022.
At the end of this year, we will see whether we can also increase pensions in 2023. That depends on our financial position at the time. In the meantime, we are looking at whether we can better link our supplement scheme to actual inflation. We keep a close eye on the interests of all participants.
Your pension has been increased retroactively from 1 January 2022 by 0.23%. This applies to everyone who receives a pension from us, accrues a pension with us or still has one with us. If you receive a pension benefit from us, we increased your benefit in the month of May. In that same month, you also received a subsequent payment for the increases from January. The additional increase of 2.77% will take effect in October. You will than also receive a subsequent payment for that part from January.
Your pension will be increased retroactively from 1 January 2022. From the month of May, you will see the 0.23% increase at mijnpgbpensioen.nl. The additional increase of 2.77% will be visible at mijnpgbpensioen.nl in October.
The rules of the new pension system (Future Pensions Act) will come into effect on 1 January 2027 at the latest. Part of those rules is that everyone will accrue pension assets instead of a pension entitlement. Pension assets move up and down with investment returns. As a result, both windfalls and setbacks will affect participants and retirees quicker.
In June, the government announced that from 1 July 2022, pension funds may increase pensions if the policy coverage ratio is 105% or higher. That limit used to be 110%. With these relaxed rules, the government is anticipating the rules of the new pension system.
Based on our policy coverage ratio, the board decides each year whether it can increase the pensions. The coverage ratio is the ratio between our assets and the pensions we have to pay out. Is the funding ratio 100%? Then there is just enough money to pay out the pensions.
The financial markets are doing badly at the moment (July 2022) and we also notice this in our investments for pensions. Nevertheless, our coverage ratio rose sharply in the past period due to the rise in interest rates. As a result, we need less money in cash to pay pensions now and in the future. The rise in interest rates more than made up for our investment losses. The result is a higher policy coverage ratio. As a result, we were able to increase the pensions.
With every decision, our board carefully considers the consequences in the short and long term. And how this will affect our participants: those who receive pension from us, accrue pension with us or still have a pension with us. They received an additional 3%. That is generally good news. The fact that we were able to increase more quickly this year due to the new rules is particularly beneficial for the participants who already receive a pension. For younger participants who are still accruing pension, it would have been slightly more favourable in the future not to have an increase this year. The board has carefully considered this. Other decisions also played a role in this. Last year, for example, our board decided not to increase the pension contribution for average earnings pension schemes in 2022. That is favourable for participants who are currently accruing pension. The board also considered the consequences for the various stakeholders, the improved financial situation and the transition to the new pension system.
The increase does have consequences for our financial situation. As a result of the increase, our coverage ratio decreases. The coverage ratio is the ratio between our assets and the pensions we have to pay out. The lower coverage ratio reduces the financial scope for increasing pensions in the future. After all, you can only spend the money once. The consequences of the increase decision per age group are independent of other developments that affect the coverage ratio. This is because, despite the decision to increase, this has increased significantly in 2022. This is mainly due to the rise in interest rates.
The graph below shows the influence of the 3% increase on the expected pension per age group.
*percentage compared to a pension that is increased every year (=100%)
For retirees, the expected pension increases by about 1% to 2 percentage points. On the other hand, for the age groups 25 and 35, the expected pension decreases by 0.2 percentage point. If no increase had been granted now, the future increase would have been higher. This concerns long-term calculations with many economic scenarios on the assumption that the pension system will remain as it is. In the meantime, the Lower House is insistently discussing changes to the system.
Are you accruing pension capital in a defined contribution scheme? For example, because you work in the sea fishing or wholesale of flowers and plants sectors? In that case, you accrue pension capital with us and your pension is not dependent on the coverage ratio. This means we will not increase your pension capital. Conversely, we will not reduce your pension if the coverage ratio is too low. Your pension capital increases due to the amount you and your employer pay, and because of the investment return on your pension capital. If we already purchased a pension from your accrued pension capital or if you already receive a pension from us, that pension has increased.
The 3% increase in 2022 is independent of the earlier reduction in your pension. You received a letter from Bpf AVH about this at the end of 2020.
You have received the monthly specification of May 2022 in mid-June. It shows your new gross pension and the subsequent payment of the increase from January to April 2022. You will receive the October monthly specification in mid-November. This shows your new gross pension and the subsequent payment of the extra increase from January to September 2022.
The May specification can also be found at mijnpgbpensioen.nl. If you have indicated in your communication preferences that you wish to receive digital mail, you will automatically be notified when your October monthly specification is ready.
In January, an increase was only legally possible if our policy coverage ratio was 110% or higher. This is done in steps up to a maximum of 2% (with a policy funding ratio of 126%). These steps depend on the level of the coverage ratio. Because our policy coverage ratio was 111.5% on 31 December 2021, we were able to increase pensions by a maximum of 0.23% at that time.
We automatically deduct tax and the contribution under the the Healthcare Insurance Act for you every month. The benefit specification we sent you in June shows how much we deduct based on this year’s tax rules. We pay the deductions to the Tax and Customs Administration. Depending on your personal situation, you may still have less net, despite the first 0.23% increase in your gross pension. As a pension fund, we have no influence on this.