At the end of 2019, the policy funding ratio of Philips Pensioenfonds was 114.2%. With this funding ratio, we can partly increase the pensions in accordance with our indexation policy. The pensions will therefore be increased by 0.64% as of 1 April 2020. Our ambition was 2%.
Wage inflation and price inflation equal to each other
For retired members and holders of a non-contributory policy, our indexation ambition is equal to price inflation* according to the derived consumer price index. This index rose by 2% in the past year. For members not yet retired, our indexation ambition is equal to wage inflation**. This too was 2% over the past year.
For pension builders: full pension accrual in 2020
In 2020, our pension builders will build up a full pension, namely 1.85% of the pension basis. In 2021, pension accrual is also likely to be 1.85%. Due to stricter legal rules, there is a small chance that you will accrue slightly less pension than 1.85% in 2021. From 2022, the amount of the pension accrual depends entirely on agreements made at the collective labor agreement table and on the elaboration of the Pension Agreement.
Future extremely uncertain due to corona virus
You will have noticed that share prices have fallen sharply as a result of the corona virus. The same goes for interest. All this has had a major impact on our financial position since January 1, 2020. Mid-March our current funding ratio was somewhere around 100%. This does not mean that the policy funding ratio is also directly in the danger zone. This shows the average of the current funding ratios over the past 12 months. But if the situation does not improve, the policy funding ratio will also be somewhere around 100% in a year's time.
It is impossible to predict whether the situation will improve in the coming year. The uncertainties are great. Therefore, we have to take seriously into account that our policy funding ratio will not be high enough in the coming years, ie above 110%, to partially increase your pension. The likelihood of our policy funding ratio falling below 100% has also increased. When that happens, the question arises whether we should reduce your pension.
* The "price inflation" is based on the development of the derived consumer price index as determined by the Central Bureau of Statistics over the period January 2019 - January 2020.
** Under wage inflation, the Fund understands the collective bargaining scale adjustment at Philips, also for those who work at Signify. For the 2020 indexation decision, we look at the collective labor agreement adjustment (s) from 2 April 2019 to 1 April 2020.