financial policy

In 2002 the social partners (employer associations and trade unions) reached agreement on measures to ameliorate the Fund’s financial position. These were contained in a funding deficit recovery plan submitted to the Dutch central bank DNB in 2002. The Fund’s financial position subsequently improved. Since 31 December 2006 its funding ratio has complied with the DNB regulatory requirement based on the Actuarial Principles for Pension Funds applicable up to that date.

Financial Assessment Framework
From the 2004 financial year onwards pension funds have been at liberty to use either the Actuarial Principles for Pension Funds or the Financial Assessment Framework as their accounting basis. In 2004 PH&C opted to continue applying the Actuarial Principles for Pension Funds until such time as the Financial Assessment Framework (Financiele Toetsingskader or FTK) was declared mandatory.

Recovery plan concluded
When the Pensions Act came into force on 1 January 2007 the Financial Assessment Framework was declared the mandatory accounting principle. In order to wind up its recovery plan the Fund was thus required to have sufficient reserves as defined in the Financial Assessment Framework. That position has now been achieved. The Fund has therefore given the DNB written notification that the recovery plan can be regarded as concluded.

Funding ratio trend since 1999

The combined impact of financial recovery measures and good returns on investment in recent years has generated a substantial improvement in the Fund’s financial position. Based on the Actuarial Principles for Pension Funds PH&C still had a funding ratio of 100% at year-end 2002. By the end of 2006 the ratio had risen to 141%.

Indexation policy
A new pension scheme came into effect on 1 January 2007. The premium percentage of 14.3% is cost-effective. That percentage includes a 0.9 percentage point surcharge to finance an indexation bonus for active pension fund participants. The surcharge applies to the basic pension scheme only, not to supplementary retirement pension products.

Pension entitlements and pension payments are not automatically index-linked. The governing board assesses whether the Fund’s financial position allows for the allocation of indexation allowances on a year-to-year basis. Indexation allowances must not jeopardise the security of pensions and promised benefits. Indexation granted in any one year cannot be invoked as grounds for claiming an indexation allowance in any subsequent year.