We must invest because saving alone does not provide a sufficient yield.
We need to invest because saving pension assets does not achieve sufficient returns.
Pensioenfonds PGB wants the best possible pension for everyone, now and in the future. This means a pension that has a purchasing power of at least 90% 15 years from now. However, Pensioenfonds PGB aims for a pension with a purchasing power of 100%.
Saving pension assets does not achieve sufficient returns to pay for pensions in the future. That is why we invest pension assets. We expect our investments to provide a surplus return of about 3% per year. This is the return that allows assets to grow relative to the pensions we have to pay out. Follow how we invest.
How much money we need to pay out pensions depends partly on interest rates. When interest rates go up, we need less money and the coverage ratio rises. When interest rates fall, we need more money and the coverage ratio falls.
To mitigate the impact of large falls in interest rates, we use investments such as bonds, mortgages and derivatives. We call this interest rate hedging. We reduce the interest rate hedge when interest rates are lower and increase it when they are higher. The underlying idea is that when interest rates are higher, interest rate hedging is expected to yield more as well as reduce the risk more. Our interest rate hedging varies between 50% and 85%. This means that at least half the risk of changes in the value of the liabilities is hedged.