„2016 was a challenging and tense year for the pension fund,”
say Michel Ubachs and Roel Mesters, two members of the Board of Pensioenfonds DSM Nederland (PDN), as they reflect on what has been an eventful year in the world of pensions.

No curtailment of pensions

The year 2016

The funding level was under pressure for a large part of the year, only improving in the final quarter. “Fortunately, this meant we could avoid lowering the retirees’ pensions and the pension accrual of both active and deferred members,” says Roel Mesters, relieved. However, he goes on to express his worries that the fund was unable to index for another year. “This has caused a further increase in the indexation arrears. As a pension fund, we're not yet realizing our ambition of using indexation as a means of compensating wage or price inflation.”

Confidence

Unsurprisingly, PDN's two-yearly members’ survey in 2016 showed that many members are worried about their pension. This is due to a lack of indexation and the fear of curtailments. That said, the survey also revealed that members still have a great deal of confidence in PDN.

New pension system

PDN is by no means the only pension plan that is coming under pressure. Plans are currently being made within the pension sector and government to transition to a new pension system, with the main goal of strengthening pension plans and ensuring that they are fit for the future. There needs to be a new pension system that can withstand financial setbacks and is better able to respond to a changing world. This will be an important theme within PDN in 2017.

Return

PDN achieved a good return (7.6%) on its pension capital investments last year, but this figure was surpassed by the four largest Dutch pension funds. Did PDN miss a trick? “Definitely not,” says Ubachs. “Comparing funds purely on one year's investment result, in this case 2016, does not give an accurate picture of what's really going on. No fund is identical. You could call PDN an ‘old fund,’ as it has a relatively large number of retirees. Such funds need to exercise more caution with investments than young funds. Although more cautious investing means less risk, it also means a bigger chance of achieving a lower return. I think it's wiser to look at the funding level, as this gives us a better idea of how a pension fund is performing. Looking at this aspect, PDN scores better than the ‘large pension funds’ at the end of 2016.”

Socially Responsible Investing (SRI)

PDN aims to achieve a good return on its pension capital investments. We are also careful to invest in areas that help to create a sustainable, safe, and fair world. Ubachs explains, “In 2017, just like last year, PDN will continue to devote its attention to socially responsible investing while making sure that it achieves sufficient return over the years and keeps pensions healthy.”