The Philips Pensioenfonds indexation table shows precisely when we can grant you indexation. That question depends on the policy funding ratio, which reflects the pension fund’s financial health. If indexation is granted, that same policy funding ratio shows whether your pension can increase by the same rate as prices. However, ultimately this is decided by the Board of Trustees, which has the authority to deviate from the indexation table. The indexation table also shows under what circumstances the Board of Trustees may lower your pension: this is the most extreme measure that the pension fund can take if its financial situation is poor.
Possibility of compensating missed indexation
In recent years your pension has not risen at the same rate as the prices. The indexation has fallen behind. This forgone indexation can be ‘compensated’ if the policy funding ratio rises above 123%. Indexation can only be compensated in small steps, however: every year the pension fund may grant you additional indexation corresponding to 1/5 of the percentage points by which the policy funding ratio exceeds 123%. For example, if the policy funding ratio is 128%, you may be granted a maximum of 1% (= 1/5 x 5%) in compensatory indexation. This restriction is based on legal rules.
Possibility of full indexation
If the policy funding ratio is 123% or higher, your pension can be raised to match the full price inflation rate (for retired members and non-contributory policyholders) or the full wage inflation rate (for active members). In this situation, the financial foundations are solid enough to justify the expectation that indexation of the pensions will remain possible in the future.
Possibility of partial indexation
Effective 1 July 2018, Philips Pensioenfonds reduced the lower threshold for the indexation table, from 116% to the legal minimum of 110%. This means that, if the policy funding ratio is 110% or higher, your pension can be raised to match part of the price inflation rate (for retired members and non-contributory policyholders) or part of the wage inflation rate (for active members). The extent to which your pension can be raised depends on the policy funding ratio. The rate of indexation increases until the ratio is 123%, when full indexation can be granted. A policy funding ratio of 120% allows for partial indexation: 10/13 of the full indexation rate. This is determined by dividing the number of percentage points by which the policy funding ratio is higher than 110% (ten) by the difference between 110% and 123% (thirteen).
No indexation possible
The ambition of Philips Pensioenfonds is to raise your pension to reflect price increases. At the same time, it is also important to minimise the risk that we will need to cut your pension. To that end, we maintain vital financial buffers, which give the pension fund a degree of financial leeway. According to the government’s rules, Philips Pensioenfonds is permitted to index your pension if the policy funding ratio is 110% or better. By law, no indexation is allowed below that threshold.
Possibility of pension cuts
If the policy funding ration falls below 100%, then the pension fund has used up its buffers. It may then be forced to cut its pensions. This is the most extreme measure that the pension fund can take if its financial situation is poor. The pensions of active members and of retired members and non-contributory policyholders will all be lowered by the same percentage.
Whether your pension can be increased, and if so by how much, depends on the financial health of Philips Pensioenfonds. What is the pension fund’s current situation?