It is important that your pension retains its value. Today's EUR 100 will not stretch as far in ten years. In order for a pension to reflect higher wages, the pension fund endeavours to impement price-indexation on the accrued pension on a yearly basis. However, you are not entitled to indexation, nor is it certain whether indexation will take place in the future.
The pension fund does not include a right to indexation on accrued pension entitlements and active pensions. It is also impossible to say if, in the longer term, indexation will take place in the longer term and to what extent. The pension fund does not reserve any money to increase the accrued pension entitlements in the future and the participants do not pay any additional premium for indexation. The pension fund finances the indexation from investment returns. If the return is high, the pension fund is more likely to increase your pension. If the return is low, however, the chances are slim.
Each year, the Board of the pension fund decides whether or not it will increase all or part of the pensions. This decision is largely dependent on the soundness of the fund’s ﬁnancial position. The more healthy the fund, the more likely that the pension fund will increase your pension. But if the pension fund is in ﬁnancial dire straits, accrued and active pensions may also have to be reduced. This will, of course, also apply to this pension entitlements.
If the fund has more than enough ﬁnancial means to pay all current and future beneﬁts, the fund is ﬁnancially sound and healthy. If the pension fund only has barely sufﬁcient or not enough ﬁnancial means, it is unsound and will have to draw up a recovery plan.
The supervisory authority (‘De Nederlandsche Bank’) monitors this process carefully. The balance between the ﬁnancial means and the pension obligations is referred to as the ‘funding level’. The average of the last twelve funding levels is referred to as the ‘policy funding level’. The supervisor has laid down strict rules on how pension funds are to calculate their policy funding level, and as such, it gives an indication of the ﬁnancial soundness of a pension fund. The table below speciﬁes at which policy funding level the pension fund may increase the pension.
The pension fund will reduce the pension entitlements and the existing pension beneﬁts as well if there is a capital deﬁcit and no other means are available to reach the policy funding level belonging to the minimum level of required equity (of 104%) within three years or within ten years to reach the policy funding level belonging to the required equity (of approximately 117%). If the fund has a deﬁcit, the employer will ﬁrst be asked to make an extra deposit. If the extra deposit is made and there still is a deﬁcit then your pension will decrease. We do this only in extreme cases, and until now, this has not been necessary at Pension Fund WKNL.
The pensions have therefore not been decreased in the last three years. Should such a situation occur, however, the fund will inform all interested parties of this in writing. Pensioners must be informed in this respect at least three months before a reduction can be implemented. For participants, former participants and other people entitled to pension, the term is one month.
Assuming the actual coverage rate at the end of the last quarter, we expect that we will not have to reduce your pension rights in the coming years. However, in case of unfavorable economic developments, a reduction of your pension rights can not be excluded.
If the pension fund has reduced in any year or years, the board of the pension fund can decide to restore these reductions. This is called ‘occasional indexation’. Occasional indexation can be granted, when full indexation is possible and:
■ The indexation has no consequences for future indexations,
■ The policy funding level exceeds the capital requirements and
■ In any year at most one ﬁfth of the capital available for occasional indexation is used.
If and to the extent that the Fund’s financial position permits a conditional indexation, it will take place on 1 January of each year. There is therefore no right to indexation. Each year, the Board decides to what extent pension entitlements and rights are adjusted.
No premium is paid and no reserve is created for this conditional indexation. The indexation is financed from the investment return. The conditionality does not only apply to the indexation, but also to the nominal entitlements and rights.
The pension entitlements and rights accrued by active and inactive participants (former participants, pensioners and persons entitled to early retirement) will be increased annually in line with the price index for the month of September in relation to the price index figure for the month of September in the previous year (Consumer Price Index for all Households as published by Statistic Netherlands (CBS)). Until 2013, the annual increase for active participants was based on changes that had occurred in the wages index. The wages index was calculated in accordance with the structural salary increase under the collective labour agreement for the Book and Magazine Publishing Business for the period between 1 January in the previous year and 1 January in the relevant year.
Please note that the cumulative indexation imbalance only applies to active participants who were active participants in the entire relevant period.
Please note that the cumulative indexation imbalance only applies to inactive participants who were inactive participants in the entire relevant period.
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