At least 21 pension schemes with a funding ratio of at least 125% have provided indexation of 3% or more in 2022 so far. This is a little more than 10% of all Dutch pension funds.

Of the funds that were able to index pensions by at least 3%, all apart from two – the fund for medical specialists SPMS and the scheme for inland shipping Rijn- en Binnenvaart – are company pension schemes.

Philips (7.4%), ABN Amro (6.4%) and Shell (5.7%) are the indexation frontrunners. However, ABN Amro is the only one of these three funds that provided this indexation figure to all its members.

Philips and Shell only awarded indexation to retirees. Indexation for active members at these firms is a function of wage growth, which was much lower than inflation (Philips) or even non-existent (Shell).

The indexation figures of the funds in question are not all comparable, as pension funds use varying definitions of inflation and also use different timeframes as an indexation benchmark.

Philips, ABN Amro and Shell have indexed most because they use the inflation of January 2022 as a standard. Most pension funds use the inflation in the month of October of the preceding year as a benchmark to determine indexation.

Dutch inflation only stood at 3.42% (including VAT and excise duty) or 3.28% (excluding VAT and excise duty) in October 2021.

Funding ratios

Dutch pension funds have seen their funding ratios rise spectacularly since the start of the year thanks to rising interest rates. However, the flipside of this is that inflation is also rising, and eating into fund ratios.

As a consequence, pension funds will see their comfortable funding levels being eroded quickly if they keep providing full indexation if inflation stays around current high levels.

Inflation in the Netherlands exceeded 10% in April for the second month running, and shows no sign of abating as the war in Ukraine drags on.

Pension funds providing more than 3% indexation in 2022
Philips 7.40%
ABN Amro 6.40%
Shell 5.70%
Staples 4.00%
Medisch Specialisten 3.70%
Rijn- en Binnenvaart 3.58%
Huntsman Rozenburg 3.42%
Provisum 3.42%
Pensura 3.42%
Yara 3.42%
Aon Groep Nederland 3.28%
Avery Dennison 3.28%
Delta Lloyd 3.28%
HAL 3.28%
Kring Progress (Unilever APF) 3.28%
DHL Nederland 3.20%
Campina 3.10%
Huisartsen 3.08%
Croda 3.00%
ING 3.00%
Niemeijer 3.00%

Source: DNB

To make sure it will be able to provide indexation in the years to come as well, ABN Amro pension fund uses a special “funding ratio for future-proof indexation”.

“This is based on the principle that at current levels of inflation, indexation cannot be provided just once but also in the future,” according to the fund.

At ABN Amro this indexation equivalent to the funding ratio currently stands at 123%. This is much lower than the fund’s unadjusted funding ratio of 134%. Figures on the fund’s website show the funding ratio came down significantly from 139% in March to 134% in April, coinciding with the fund providing indexation.

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