Unfortunately pensions and entitlements will not be raised along with wages or price increases either, known as indexation. Pension entitlements are the pensions accrued by (former)employees that have not retired yet.
No indexation
PDN endeavors to raise pensions and pension entitlements every year to keep them in line with price increases or wage raises. In its annual decision on indexation, the fund's financial situation and the legislation on indexation are major factors. The pension fund's financial position is expressed by the funding level. The funding level is the ratio between the pension fund's assets and all of its current and future pension liabilities. Unfortunately, the funding level of 102.3% on 31 December 2019 was below 110% and thus insufficient to allow for indexation. This applies for pensions currently in payment and for future pensions that employees are accruing alike. As a consequence of not granting indexation the purchasing power of pensions and pension entitlements will be decreasing. When assuming that the average price level is raised annually (inflation) by 2% and there is no indexation for ten years, then your pension will buy you 20% less after the same 10-year period. Though your benefit amount is not reduced, it will buy you less.
Curious to learn about the indexation of your pension or pension accrual in recent years? Click here.
If you are still accruing a pension and wonder what the consequences of non-granting indexation for your pension are, then log on to ‘My PDN pension’ on the PDN website.
For more information about PDN's indexation, click here.
No pension cuts
Like last year, the Board has drawn up a recovery plan. On the basis of calculations made in the recovery plan, PDN expects the funding level to recover to the required level without making cuts in pensions in payment and accrued pension entitlements. This has led the Board to decide that there will be no pension cuts from 1 January 2020. Next year's decision whether pension cuts are required or indexation can be granted will yet again be based on the funding level development. The funding level's development among others depends on the developments on the financial markets. In view of the current development, there is a chance that pensions will have to be cut by 2021.
For more information about PDN's recovery plan, click here.
Change in regulations in reducing pensions
For all pension beneficiaries, the rules have changed slightly when it comes to pension cuts. The law says that PDN will not be allowed to cut pensions until 3 months after PDN has informed all beneficiaries. That term was first 1 month.