We try to increase your pension every year. The aim is to increase the pensions to some extent in line with the cost of living. To do so, we look at price increases over the past year. In this news item, we explain more about this increase.
Your pension will increase by 3.26% in 2024
This increase consists of two components:
1) an increase of 1.47% according to our standard indexation rules; plus
2) an additional increase of 1.79%.
For the increase in 2024, we look at how much prices have risen in the period from July 2022 to July 2023. That increase was 3.26%. In principle, we want to give at least half of this increase as an indexation. The standard rules for indexing pensions allow us to increase your pension by 1.47%.
In 2023, the government relaxed the rules temporarily. By doing so, the government is anticipating the new rules for pensions under the Dutch Future Pensions Act (Wet toekomst pensioenen). Pension funds are therefore allowed to increase the pensions even if their funding ratio is lower than normally required. This means that an additional increase is possible. We are taking advantage of this opportunity.
More details regarding the additional increase
We may apply the additional 1.79% increase only if we explain some components to you. Below, we list and explain these components.
a) We expect that the pension entitlements and rights built up will soon be converted
Employer and employee organisations in the merchant navy (i.e. the social partners) are jointly studying the new scheme. One part of the new scheme is a decision on the conversion of the pensions. By conversion we mean transferring existing pensions to the new pension scheme. The study is ongoing, but the social partners have not yet taken final decisions.
We may apply the additional increase only if we expect pensions to be converted. The social partners signalled their intention in late 2022 to convert the pensions. They will take the final decision regarding this matter in 2024.
We conducted our own review of whether conversion was in the best interests of all members, former members and pensioners. We see no reason to deviate from the expectation of the social partners. We therefore expect pensions to be converted at the start of the new pension scheme.
b) The additional increase is being granted in the interests of all members, former members and pensioners
Just like last year, we considered at length whether all interests had been properly taken into account. Is it fair, to both young and old? Can we be sure that everyone will benefit? For years now, pensions have not or have only been partially increased. Everyone who receives a pension felt it in their pockets. In 2023, we already increased pensions by 10.84% partly for this reason. As a result, the purchasing power of pensioners, for example, was greatly improved immediately.
However, prices have continued to rise over the past year. We carefully weighed up all interests when deciding on an additional pension increase. To that end, we look at the impact of the additional increase on the expected pension when you retire. The additional increase will have only a negative impact on the pension of no more than 0.4% for everyone up to 65 years old. It will have a positive effect on the pension of up to 1.25% for everyone over 65.
We aim to have all pensions increase by at least 50% in line with the cost of living. But at the same time, we also have a desire to do more if possible. By means of this additional increase, we are fulfilling that wish for all members, former members and pensioners in the same way.
c) We have looked in detail at the impact of the additional increase on different generations
We have calculated the short-term impact (up to 1 January 2027) of granting the additional increase. The chart below shows how wealth is distributed differently due to the additional 1.79% increase. Distributing wealth differently is also known as ‘redistribution of wealth’.
What do you see in this chart?
An example: suppose you are 25 years old. The redistribution of wealth in your case is 99.6%. This means that due to the 3.26% increase, your pension – at the time you retire – is expected to be 0.4% lower than it would be with a 1.47% increase.
A pension fund can spend its money only once. Granting an increase now may not benefit everyone. The additional increase is slightly detrimental for members up to around 65 years of age (maximum -0.4%). The situation for members over 65 will improve slightly, by up to 1.25%.
- For those up to around the age of 65, the increase has a small negative impact on the pension. We are now using some of the assets in order to be able to grant the increase. So we therefore have fewer assets to help pay for the pensions of these persons in the future. But a large proportion of these individuals will still be building up pension for a long time. Therefore, this decision hardly impacts their pension. Consequently, the final effect is only slight.
- For those older than 65, the increase will have a small positive impact. They have already built up most of their pension, or have even retired. Their pension will immediately be higher as a result of the increase. Their purchasing power will improve immediately as a result. For those still building up pension, the increase will apply to everything they have already built up. That effect will be greater than the impact on the part they still have to build up until retirement. The effect is therefore positive.
We carefully weighed all interests (of active members, former members and pensioners) when deciding to grant an additional increase. The board considered:
- the purchasing power of pensioners,
- the expected pension for everyone and
- the possible details of the new pension scheme.
The additional increase will have a negative impact of no more than 0.4% for active and former members up to 65 years of age. It will have a positive effect of up to 1.25% for active members, former members and pensioners aged over 65.
We think a 3.26% increase is appropriate and balanced. We are now using part of our assets in order to be able to increase the pensions. This is in line with our policy on how we deal with increasing pensions. However, sufficient assets also remain for the future pensions.
Together with the social partners, we are considering how those assets can be used in a balanced manner in the transition to a new pension scheme. An additional increase now – given the financial health of the fund – does not seem to preclude a satisfactory transition to the new pension scheme.
On balance, we think it is responsible to decide to increase pensions by 3.26% in 2024. This percentage consists of an indexation of 1.47% according to the standard rules and an additional increase of 1.79%.
We will increase the pensions between 1 April and 1 July 2024
We normally increase pensions right at the beginning of the year. However, our IT systems will be renewed in early 2024. We cannot therefore increase pensions at that time. As long as we are working on these renewals, there is a risk that data will not be processed properly. As a result, we cannot guarantee an error-free increase in pensions during this period. We are doing our utmost to adapt our IT systems as quickly as possible. We expect the renewals to be completed during the second quarter of 2024.