The funding level is an important yardstick for judging the pension fund’s financial situation. It indicates to what extent the pension assets are high enough to meet all future pension obligations (including, in particular, the pension benefit payments).

Besides the funding level, a pension fund must calculate its ‘policy funding level,’ this 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.

We're happy to explain how the funding level in 2024 is calculated.

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The funding level was 122.3% at the end of 2024, which is 2.1% higher than the funding level at the start of the year (120.2%). Besides the funding level, a pension fund must calculate the ‘policy funding level’, this being the average of the last twelve months of monthly funding levels. The policy funding level was 124.9% at the end of 2024, which is 3.0% lower than at the start of the year (127.9%).

The policy funding level can be used to determine whether a pension fund needs to reduce the accrued pensions and pensions currently being paid out. 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 decisions on whether or not to increase pensions (indexation).

The conditional indexation for members was based on the general wage increase at DSM NL Services BV. With effect from 1 January 2025 (over the year 2024), with a view to the transition to the new pension system and at the request of the social partners, the conditional indexation for members, as well as for deferred members and pensioners was based on the increase in the consumer price index (CPI-All Households derived), as determined by Statistics Netherlands (CBS) from October to October.

The Board used the indexation policy and PDN’s financial situation as at end 2024 to assess whether indexation could be awarded to members, deferred members and pensioners as of 1 January 2025. The fund’s financial position (in terms of the policy funding level) at the end of 2024 was sufficient to award indexation as of 1 January 2025. The fund is awarding indexation equivalent to approximately two-thirds of the maximum benchmark. This means that all members, deferred members and pensioners will receive indexation of 1.78%. Unfortunately, due to procedural and implementation constraints, for the 2024 indexation the Board was unable to use the so-called transition FTK, which allows for full indexation.

In line with PDN’s indexation catch-up policy, the missed indexation will be recorded to enable catch-up of any indexation if the fund’s financial position improves substantially.