Dutch pension fund, ABP, made a return of 11.1 per cent on investments over the past year despite the impact of the pandemic, pushing its current funding ratio up by 16.7 percentage points to 110.2 per cent.

The fund's assets grew to €550bn over the past year as a result of the investment performance, with the policy funding ratio also increasing to 102.8 per cent as of the end of 2021.

Despite these improvements, ABP chairman of the executive board, Harmen van Wijnen, acknowledged that the policy funding ratio is “still too low" to allow a pension increase.

The policy funding ratio, which is an average of the last 12 current funding ratios, provides a more stable picture of the schemes funding position and is therefore used in decisions about increasing pensions indexation.

Whist the policy funding position has shown improvements, increasing from 87.6 per cent in 2020 to 102.8 per cent at the end of 2021, a policy funding ratio of at least 110 per cent would be needed to increase pensions.

However, van Wijnen noted that pension reduction has "disappeared from the picture" amid the strong returns from the scheme, with trustees able to "start to think carefully about a pension increase".

“In recent years, we have argued in favour of increasing pensions earlier and we are happy if this is possible again. From 1 July this year, the minimum policy funding ratio at which we are allowed to increase will most likely fall from 110 per cent to 105 per cent," he continued.

“As soon as we are allowed to increase pensions, it is our intention to do so. We are investigating the date from which we can implement this, should the policy funding ratio exceed 105 per cent in the course of this year.”

In addition to this, the scheme confirmed that it expects to have sold the majority of relevant holdings in fossil fuel producers by 2023, having previously committed to divesting from this sector, clarifying that it does not expect a negative effect on the fund’s performance as a result.

Share Story: