Unfortunately in 2021 pensions cannot be raised along with wages or price increases, known as indexation.
What does it mean for your pension?
As a consequence of not granting indexation the purchasing power of your pension 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. Pensions at PDN have not been raised in recent years.
Curious to learn about the non-granting indexation in recent years? Please click here.
If you are still accruing your pension and wish to find out more about the consequences of non-indexation for your pension then surf to the PDN website and log in to ‘My PDN Pension’.
For more information about PDN's indexation, please click here.
No indexation
PDN endeavors to raise pensions 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 99.7% on 31 December 2020 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.
No pension cuts
As was the case last year, the Board has drawn up a recovery plan for this year. This plan will be finalized in March. On the basis of the calculations in the recovery plan, PDN expects that the funding level can be restored to the required level without pension curtailments. This has resulted in the Board’s decision not to reduce (curtail) pensions as from January 1, 2021. A number of factors including developments in the funding level determine whether pensions will need to be curtailed or can be indexed next year. These developments in the funding level are in turn partly dependent on movements on the financial markets.
For more information about PDN's recovery plan, please click here.