Making sure that your pension keeps its value
We seek to raise your pension annually
Philips Pensioenfonds wants to offer you a pension that retains its purchasing power in the long term, to make sure that it still buys you as much in the future as it does now. That is our ambition. To realise that ambition, we need to adjust your pension to reflect increases in prices (for retired members and non-contributory policyholders) and wage increases (for active members). This is called ‘indexation’.
Overview indexations
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Your pension will increase as of April 1, 2024
The Board has determined the pension increase as of April 1, 2024 after weighing between providing as much indexation as possible and protecting the financial buffer. It follows from the Board's consideration that the pensions of retired members and non-contributory policyholders will increase by 2.4% as of April 1, 2024. This compensates for the entire price inflation over the past year. The accrued pensions of cactive members will increase by 4.0%, which is in line with wage inflation. This full indexation is possible by using the more lenient indexation rules of the transition FTK. Read more about this in the bridging plan.
Bridging plan 2024
In the bridging plan you can read why applying the more lenient indexation rules is a sensible decision given the pension fund’s finances, and how it will affect our members in the different age categories.
- Retired members and non-contributory policyholders
The increase in the pensions in payment and non-contributory pensions as of 1 April 2024 was 2.4%.
- Active members
The increase in the accrued pensions as of 1 April 2024 was 4.0%.
Suggestion: go to MijnPPF for our letter with more information about the indexation decision 2024.
The Board determines annually how much indexation is sensible
Your pension will look different when a new pension scheme will apply in 2026 to all participants of Philips Pensioenfonds that is in line with the new pension system. The Board wants every participant in this new pension system to be able to make a good start and that the differences between participant groups are limited, explainable and fair until the moment of transition to the new system. These principles are also important for the decision that the Board takes each year on the increase of the pensions. Read more about this in our magazine Generaties or in this news item.
Indexation allocation
How much pension increase the Board can provide in any given year depends on several factors. Read more about this and see an overview of news items about the decisions in recent years.
How the board makes the indexation decisionIndexation policy: a quick introduction
This information explains under what circumstances your pension can be raised.
Indexation ambition
We try to increase your pension each year by wage inflation (for pension accruers) or by price inflation (for pension recipients and members with a paid-up policy). This is our ambition, as described in our indexation policy. However, this indexation is not an automatic given. Every year, the Board of Trustees decides whether your pension can be increased, and if so by how much. Whether or not we can realise our ambition depends on what the law permits, based on our financial health. Another factor is that we want to be in a solid financial position in 2026 when we switch to the new pension system.
More about indexation ambitionIndexation allocation
The Board aims to increase your pension by wage inflation (if you are accruing pension) or by price inflation (if you are pension recipients or holder of a paid-up policy). Until the transition to the new pension system, the Board annually assesses which pension increase (indexation) is sensible.
More about indexation allocationIndexation for active members
For Philips, Signify and Versuni employees currently accruing pension rights, the pension fund seeks to raise the accrued rights annually. These annual increases are important to ensure that your pension retains its value when you start drawing it.
More about indexation for active membersIndexation for inactive members
If your employment ends or if you retire, Philips Pensioenfonds seeks to increase your pension annually to reflect price inflation, based on increases in the derived consumer price index published by Statistics Netherlands (CBS).
More about indexation for inactive membersQuestions Bridging plan
In the bridging plan you can read why applying the more lenient indexation rules is a sensible decision given the pension fund’s finances, and how it will affect our members in the different age categories.
With the transitional financial assessment framework, more lenient indexation rules became available for pension funds to use on 1 July 2023, which is when the Dutch Future of Pensions Act (Wet toekomst pensioenen) came into force. To apply those rules, pension funds need to substantiate why it is in the best interests of their members to apply the transitional financial assessment framework, and what the effects are. This includes calculating how the members are affected by the more lenient indexation rules, and what the consequences are for the pension fund’s financial position. It also requires substantiating how these effects are ‘balanced’. This is then recorded in a ‘bridging plan’, which is reviewed by the Dutch central bank (DNB).
Philips Pensioenfonds’s bridging plan came into place on 1 January 2024. Philips Pensioenfonds submitted its bridging plan to the Dutch central bank (DNB) in January 2024. The plan was approved in February, and now the more lenient indexation rules may be used for the decision about indexation at 1 April 2024.
The bridging plan explains why Philips Pensioenfonds wishes to have the option of using the more lenient indexation rules, why this is a sensible decision given its finances, and what the effect will be for members in different age categories and different groups (active members, pension beneficiaries and non-contributory policyholders).
Philips Pensioenfonds’s bridging plan shows that the finances will still be sufficiently healthy when we switch to the new pension plan, even with the more lenient indexation rules. The bridging plan also provides confirmation that using the more lenient indexation rules will not create any major differences between separate groups of members, nor between younger and older members. In this respect, the bridging plan builds on the analyses that we carried out in 2021 and that led to the decision to apply the transitional financial assessment framework as soon as the law permitted.
The bridging plan will remain in place until we switch to the new pension plan in 2026. However, Philips Pensioenfonds has to update the plan each year. It might also need to adjust its policy if circumstances require.
The rules for indexing pensions are more lenient. Under those more lenient rules, pension funds are permitted to index their pensions if their funding ratio is 105% or higher. This means that the financial reserve may not drop below 5% as a result of the indexation. Any assets above that minimum may be used to index the pensions, as long as the pension fund can demonstrate that it will still have enough resources to make a balanced switch to the new pension plan. An important factor here is that the Board of Trustees of Philips Pensioenfonds determines every year what a sensible rate of indexation is, even without these legal requirements. Every year, the Board weighs maximum indexation against the need to protect the buffer, making allowance for a minimum target funding ratio for entitlement conversion of 114%.
Whenever we make a decision, we consider how it affects all our members. Increasing the pensions in the meantime means that pension beneficiaries have more pension immediately. The pensions of members who are not yet drawing their pensions will also go up, although it is particularly members aged 55 and up who benefit from the more lenient indexation rules.
However, indexing the pensions costs money, which is taken out of Philips Pensioenfonds’s financial buffer. The Board wants each member to get off to a strong start under the new pension plan in 2026, which is why we also consider the effects of the decision during the period leading up to that moment. If we increase our pensions now, that means that we will have less money to share out when we switch to the new system. On balance, the effect is slightly less favourable for our members who are still accruing their pension (and in particular the younger members): their indexation is calculated on a smaller value of accrued pension than older members. They would benefit more from slightly less indexation now, which would mean a little more money in their personal pension savings when we make the switch. At the same time, using the transitional financial assessment framework also means a greater risk of having to cut our pensions. This will have an immediate financial effect for our pension beneficiaries. However, it is worth noting that the likelihood that Philips Pensioenfonds will be forced to make cuts is very small, even using the transitional financial assessment framework. We are in a strong position at this time, as a result of our relatively cautious investment policy in the run-up to the new pension plan, and because our annual indexation decision considers what a maximum sensible rate of indexation is.
If any material differences between members emerge when we make the switch, we will make allowance for those differences when we convert the accrued pensions to the new pension plan.
Under the government’s temporary new rules (the transitional financial assessment framework), Philips Pensioenfonds is allowed to be more lenient with its indexation until the new pension plan is adopted. This benefits older active members and pension beneficiaries in particular. At the same time, giving more indexation now means that the pension fund has fewer financial resources to raise the pensions further down the road. In addition, the more lenient rules for indexation are balanced by slightly stricter rules for cutting the pensions in financially leaner times. Younger members are concerned mostly with the long term, and so a higher rate of indexation now is less favourable for them in the long term. However, it is worth noting that Philips Pensioenfonds’s financial position is strong at present, and the likelihood that we will need to cut our pensions is small, even under the more lenient indexation rules.
It is uncertain what the effects will be, on balance, of a higher indexation rate and a stricter policy for cutting the pensions. Philips Pensioenfonds has mapped out the potential generational effects using the method prescribed by law, which shows that the differences between using the existing indexation rules and using the more lenient indexation rules, expressed a the net advantage (netto profijt), are minor for all our members (ranging from a positive value of 1.1% to a negative value of 0.4%). The effects of the more lenient indexation rules are limited to the three years ahead (until we switch to the new pension plan), which is a short period of time. They are also limited by the Board’s annual decision to consider what a maximum sensible rate of indexation is, bearing in mind the goal of protecting the financial buffer (alongside the goal of awarding as much indexation as possible). As such, it is the Board’s conclusion that using the more lenient indexation rules is balanced, in part because the annual indexation decision includes weighing the differences between different groups of members. It is also worth mentioning here that the Accountability Body and the Dutch central bank (DNB) have expressed positive opinions on this conclusion in the bridging plan.
To determine what effect using the more lenient indexation rules would have, we calculated the pension values for separate groups of members using the existing legal indexation rules and using the more lenient indexation rules under the transitional financial assessment framework for the period until the end of 2026 (when we expect to switch to the new pension plan). This approach reveals how using the transitional financial assessment framework will affect our members’ pensions.
Explanation: net advantage, valuation of a pension plan
A pension’s value is expressed using the concept of ‘net advantage’ (netto profijt): a legally prescribed method for determining the value of a pension plan. The figures below show the difference between the pension values of separate groups of members with and without the more lenient indexation rules, expressed as ‘net advantage’. All the gains and losses that are identified for the various groups of members are expressed in terms of the net advantage. This is, therefore, not about raising or lowering the pensions.
You can download an abbreviated version of the bridging plan here. The bridging plan explains why Philips Pensioenfonds wants to have the option of applying the more lenient indexation rules, why this is a sensible decision given the pension fund’s finances, and how it will affect our members in the different age categories.
The more lenient indexation rules are favourable for active members over the age of 55: they gain up to 1.1% by benefiting from the extra indexation in the short term. The younger group of active members suffer a minor loss of up to 0.4%, as they would benefit more from having a greater financial buffer and more indexation in the future, with more pension accrued.
To see a graph with the effects for every age category, see the bridging plan that is published on our website.
The more lenient indexation rules are favourable for all retired members, who see an immediate financial effect of the extra indexation. Maximum indexation in the short term means a gain for them of up to 1.1%.
To see a graph with the effects for every age category, see the bridging plan that is published on our website.
For non-contributory policyholders, the age when the more lenient indexation rules becomes favourable is slightly lower than for active members. If they are above the age of 45, they gain up to 1.1%. Younger policyholders will have barely any loss or gain.
To see a graph with the effects for every age category, see the bridging plan that is published on our website.
Questions Indexation decision
Do you want to know more?
Unfortunately, the first paragraph of the email notification sent to active members contained an error. It says 'This means that effective 1 April 2024 your pension will be raised by the same rate as price inflation over the past year' while it should have said 'This means that effective 1 April 2024 your pension will be raised by the same rate as wage inflation over the past year.' The indexation percentages stated in the message are correct. You will also find the correct information in the letter that you can download in MijnPPF.
According to the existing legal rules for indexation, a maximum partial increase of 59% of the ambition was possible. This amounts to an increase of 1.42% for retired members and non-contributory policyholders and 2.36% for active members. However, from 1 January 2024, Philips Pensioenfonds will use the more lenient indexation rules that are available through the application of the transition FTK. This allows earlier and more indexation to be provided than under the existing statutory indexation rules. On this basis, the Board has been able to decide to fully increase all pensions.
Given the current funding ratio of Philips Pensioenfonds, it is not legally permitted to provide compensatory indexation. The more lenient indexation rules that Philips Pensioenfonds uses do not affect this. Only when the policy funding ratio is within the limit for future-proof indexing compensatory indexation can be given. This is only allowed in small steps. Each year the Pension Fund may provide a compensatory indexation of one-fifth of the number of percentage points that the policy funding ratio is above that legal limit. This limit is equal to 138.8% as of December 31, 2023. An example: if the policy funding ratio is 143.8%, a compensatory indexation of a maximum of 1% (= 1/5 x 5%) may be given in that year. So if the total missed indexation is 6.5%, then with a continuous policy funding ratio of 143.8% it will take 6.5 years before the entire missed indexation is made up. In other words: a policy funding ratio of 143.8% is needed for 6.5 years to fully catch up on the 6.5% deficit. Whether compensatory indexation is possible therefore depends on the Fund's policy funding ratio and the legally prescribed limit. This legal limit varies over time, mainly because interest rate developments also influence it.
No full indexation has been granted since 2011. The ambition of the Board of Trustees is to grant full indexation at the same rate as price inflation (for retired members) and at the same rate as wage inflation (for active members). A review of recent years shows that up to and including 2024 the total indexation that has been forgone compared with that ambition is:
- 16.1% for retired members and non-contributory policyholders
- 18.7% for current employees of Philips and Signify accruing pension rights under the flex pension (collective labour agreement and senior directors) plan
- 20.7% for current employees of Philips and Signify accruing pension rights under the flex pension (executives) plan.
Our indexation ambition, as agreed by the unions at Philips and laid down in our pension regulations, is to be able to compensate for price inflation over the period January-January, based on the derived consumer price index (more information can be found on the CBS website).
The percentage of 3.8% published on the CBS website for the year 2023 is a kind of average inflation over the year 2023. In other words, the average of the indices for the months of January to December of the year 2023 compared to the average of the indices for the months of January to December of the year 2022. This leads to a percentage of 3.8%. Moreover, this percentage is based on the so-called non-derived price index, as indicated above we use the derived index. The 'average' development of the derived price index in 2023 was 3.0%.
Explanation of the derived consumer price index
Unlike the 'normal' consumer price index, the derived consumer price index does not include changes in the rates of product-related taxes (e.g. VAT and excise duty on alcohol and tobacco), municipal taxes and subsidies. This amounts to price changes that are the result of government measures.
Every year, as prices increase, Philips Pensioenfonds seeks to raise its pensions accordingly. These increases are based on the ‘derived’ consumer price index published by Statistics Netherlands (CBS). That index does not make allowance for price increases that result from new product-specific tax rates. Philips Pensioenfonds is not alone in this: the derived price index is used by most pension funds.
In June 2023, Statistics Netherlands introduced a new method for measuring price inflation. What is new about this methodology is that it takes into account energy rates that households actually pay for gas and electricity based on existing contract data with various energy suppliers. In the old methodology it was assumed that all households were subject to new energy contracts/prices.
As a result of the introduction of the new method, price inflation over the period January 2023 - January 2024 is 1 percentage point higher than if the new method had already been introduced in 2021. If we had taken this adjustment into account, the indexation ambition would have been 1.4% instead of 2.4%. At the same time, the indexation ambition for 2022 and 2023 would have been 1 percentage point higher. Cumulatively, the adjustment of the measurement method has no impact on price inflation, it only concerns a shift over time.
For the indexation decision of April 1, 2024, it was decided to base the figures from Statistics Netherlands. So no correction has been made for the change in the CBS measurement method. This means that the indexation for retired members and non-contributory policyholders is 1% higher than if the inflation figure were adjusted.
When we talk about 'differences between participant groups', we mean 'differences in the extent to which we can realize the ambition for these groups'. An ambition has been formulated for the pensions of our participants; this is a pension based on full pension accrual and full indexation. This ambition applies to all participants. That is why we think it is important that if there are differences in the extent to which we can achieve that ambition, these differences are limited, fair and explainable.
Every pension increase must be paid from the financial buffer. And that buffer is there for all participants together. The Board's annual assessment of pension increases therefore examines whether the decision is 'balanced'. If the differences between participant groups are limited, fair and explainable even after the indexation decision, the 'balance test' will usually be met.
The ambition of Philips Pensioenfonds is to raise current and non-contributory pensions annually by the same rate as price inflation, expressed in the movements in the derived consumer price index established by Statistics Netherlands (CBS).
The ambition of Philips Pensioenfonds is to raise the accrued pension rights of employees still working for Philips, Signify and Versuni annually by the same rate as wage inflation, expressed in the movements in the collective salary scale adjustments at Philips (also for those who work for Signify).
Whenever the Board of Trustees passes a decision to raise the accrued pension rights, this takes effect on the same date every year: 1 April.
As established in our indexation ambition, we want to increase the pensions of pension beneficiaries and non-contributory policyholders by the same percentage as price inflation, expressed in the derived consumer price index. For active members, the ambition is to raise the accrued pensions every year by the same rate as wage inflation, expressed as the movement in the collective salary scale adjustments at Philips. This extends to Signify and Versuni employees as well. This gives shape to the arrangements made during the collective negotiations between employers and trade unions, which also include the indexation ambition.
For active members, Philips Pensioenfonds bases its indexation decisions on the collective salary scale adjustment at Philips (also known as wage inflation). This also applies to employees of Signify and Versuni. What is different for 2024 is that separate disciplines at Philips were awarded different salary scale adjustments (rates of 4% and 7% were agreed). The 4% collective salary scale adjustment will be used as the basis for the decision about indexation at April 2024 for all our active members, including anyone in a discipline where the salary scales have been raised by 7%. The reason for this is that using a higher rate than 4% as the basis for our indexation decision for all active members is legally not allowed.
The Philips Pensioenfonds flex pension plan is a collective defined contribution plan with an underlying career-average earnings ambition. That career-average earnings ambition means that the pension that you receive depends not only on your average earnings during your working life, but also the degree to which your accrued pension rights are adjusted during the accrual phase, which is how your pension will retain its value over time.
If you are already drawing your share in your former partner’s retirement pension, or if your former partner no longer works for Philips or Signify, the information in the letter applies both to the pension that you are receiving and to your extraordinary survivor’s pension. If your policy includes an extraordinary survivor’s pension, but you have not started drawing your share in the retirement pension because your former partner is still working for Philips or Signify, the information in the letter applies only to your extraordinary survivor’s pension. The accrued retirement pension (and your share in it) will be indexed in accordance with the indexation policy for active members. This means that it will be increased by 4.0% on 1 April 2024. The table below shows how your pension will be indexed.
| Share in retirement pension | Extraordinary survivor’s pension | |
| Your ex-partner works for Philips or Signify | 4.0% | 2.4% |
| Your ex-partner no longer works for Philips or Signify, or has already retired | 2.4% | 2.4% |
| Your ex-partner is no longer alive | NA | 2.4% |
We will pay you your April 2024 pension on the first working day in April. This means that your pension, including the 2.4% increase, will be transferred on Tuesday, 2 April 2024. You will receive your detailed pension statement shortly before that (either by post or in digital format via www.philipspensioenfonds.nl/mijnppf), showing the new gross value of your pension and the net amount that you will receive.
All beneficiaries of a retirement pension, a survivor’s pension, an orphan’s pension or a disability pension will receive their annual pension overview in late-April 2024. That annual pension overview shows the 2.4% increase.
Every year until you retire, you receive a Uniform Pension Overview based on your pension situation at 1 January. Since your pension will be increased on 1 April 2024, that increase will only be reflected in your Uniform Pension Overview for 2025, which you will receive around mid-2025. Your new pension situation will appear in the more up-to-date Pension Planner in MijnPPF on mid April 2024.
Your accrued pension will be increased by 4.0% on 1 April 2024. This increase will appear in the Pension Planner from Mid-April 2024 forward. Also updated every year on 1 April is your pension base: the portion of your salary on which you accrue your pension. The new information will appear in the Pension Planner in early May, which means that any pay rises that you received between 1 April 2023 and 2 April 2024 will be reflected in your pension base. This in turn affects how much your pension is expected to be according to the Pension Planner.
In view of the transition to the new system, the Board of Trustees wants to extra protect the financial buffer. Under the new pension system, pensions will follow the ups and downs of the economy more closely than they do now. A financial buffer will help our members to start with a higher pension, or it can be used to set up a ‘reserve’ in case of setbacks in the future. Whatever the case, ultimately the buffer will be spent, directly or indirectly, on our members, so it is in their interests that the buffer is as high as possible when the new system is introduced. In concrete terms, it can be used for the following purposes:
- To top up our members’ individual pension savings, so that they have a higher pension. When the pensions are higher, it is easier to absorb pension cuts than it is with lower pensions.
- Using part of the buffer to form a ‘reserve’. The point of that reserve is to make sure, wherever possible, that we do not need to cut pension benefits if future financial results fall short of expectations.
- To provide active members with at least partial compensation if they are disadvantaged by the switch to the new pension system. We still have to make a decision on this point.
The short answer is that a final decision on how to divide the buffer can only be made after numerous other matters have been decided. First, the employers and unions need to decide whether the new legal pension rules will also apply to pensions that have been accrued, i.e. whether those pensions will be converted to the new system. If so, that conversion will need to be studied to make sure that it is balanced properly. Important factors are not only how the buffer is divided, but other questions as well: whether any part of the buffer, and if so how much of it, will be put towards a reserve (the ‘solidarity’ or ‘risk-sharing’ reserve), for example, or to finance compensation (in full or in part) for members who will be disadvantaged by the transition to the new pension system. Before a final decision can be made on the issue of conversion, the Accountability Body must be asked for its advice.
If Philips Pensioenfonds raises its pensions, this is done on 1 April of each year. The reason why Philips Pensioenfonds uses this date of 1 April is that this corresponds to the employment regulations that are in place at Philips. For example, pay rises take effect on 1 April, and the basic data for pension accrual are also established on 1 April every year. The regular indexation is timed for 1 April to match this.
The increase for pension beneficiaries and non-contributory policyholders is based on the derived price index rate from January to January, which is finalised in early March. The increase for active members is based on the collective salary scale adjustments at Philips during the period from 2 April of the previous year to 1 April of the current year. Every year in March, we announce by what rate the pensions will go up on 1 April, and you receive a personalised letter from us explaining our indexation decision.
Related information
You might also be interested in the following information.
News overview
Visit our news page to find out the latest news, including information about increases in your pension through indexation.
Go to news overview
Financial position
Whether your pension can be increased, and if so by how much, depends, among other things, on the financial health of Philips Pensioenfonds. What is the pension fund’s current situation?
Go to financial position