Generally speaking, money drops in value every year. You can buy less in 2020 than you could in 2019. This is referred to as ‘inflation’. The Heineken Pension Fund tries to index-link the pension you have accrued each year. In other words, the pension you have built up is increased in line with the general increase in prices. We call this an index-linked pension. Unfortunately we are not always able to do that. If we are faced with financial difficulties then it is always possible that the Heineken Pension Fund is unable to index-link pensions either fully or partially. Subsequently, that means your pension drops in value. If finances then start to improve, extra indexation compensation can be granted to regain purchasing power.
Indexation compensation can only be granted if the policy funding ratio is at least 110%. If the policy funding ratio is somewhere between this threshold of 110% and the present upper limit of 125%, then only partial compensation for indexation can be granted. If at a given time the policy funding ratio is above or the same as this upper limit, then full compensation for indexation can be granted.Our expectation is that we shall not be able to increase your pension over the next few years. When the fund is again able to grant indexation compensation it will only be partial compensation in the initial years. Full indexation compensation based on the price index can only be granted at a funding ratio that currently stands at approx. 125% or above. However, this upper limit does fluctuate. If the rate of interest increases, then the upper limit for indexation compensation will probably also rise.
Over the past three years the Heineken Pension Fund has increased pensions by means of indexation as follows*:
* The figures indicating price increases are based on the figures published by the Netherlands Central Bureau of Statistics (CBS).
Prospects in scenario’s
In your Uniform Pension Overview (UPO) and on www.mijnpensioenoverzicht.nl your pension to be acquired is also shown in three scenarios in prospects, in addition to your pension to be acquired according to the pension regulations.
These scenarios provide an estimate of the pension if there are windfalls or setbacks in the future. Through three amounts based on an optimistic, expected and pessimistic scenario, you will gain insight into the uncertainty surrounding the purchasing power of your pension. An important assumption for all three amounts is that you will continue to work until your 68th birthday and continue to accrue pension within the current scheme. If you stop working on a earlier age, your pension will be lower.
Various scenarios have been devised. The one scenario is based on a positive situation in terms of interest, investments and price increases (purchasing power). The other is based on a negative situation. All pension funds and insurers use the same scenarios.
- The expected scenario is shown in the middle at the top. This is the pension you could expect to receive in due course on the basis of current figures. At the moment there is a 50% chance that your pension will be lower and a 50% chance that your pension will higher than this amount. The expected sum total is based on the assumption that your pension will be partially increased in line with price increases.
- The optimistic scenario (the arrow on the right) shows the amount you are likely to receive in the event of a very positive situation. At present, there is only a slight chance (5% of the prospects) that you will arrive at a higher amount than the one shown on the right. In the optimistic scenario it is assumed that your pension, in conformity with the price increases, will be increased.
- The pessimistic scenario (the left arrow) shows the amount you are likely to receive if the situation becomes much worse than expected. Here too, at the moment the chance is only small (5% of the prospects) that you will receive a lower amount than the one shown on the left. The pessimistic scenario is based on a cut back on pensions.