PME capital stabilises in the second half of 2022
PME had a negative return of 23.27% over 2022. This resulted in a capital reduction of over € 64 billion to just under € 50 billion. The reduction was largely caused by the consequences of the war in Ukraine. The last two quarters were characterised by a stabilisation of the capital, which is continuing through early 2023. PME's funding ratio decreased to 110.4% in Q4. This was mainly due to the decision in November to increase the pensions by 6.2% as of 1 January.
Key figures Q4 2022
- Current funding ratio as at 31 December 2022: 110.4%
- Policy funding ratio as at 31 December 2022: 111.7%
- Investment return Q4 2022: + 0.73%
- Investment return 2022 cumulative: -/- 23.27%
- Capital increased to approx. €49.8 billion in Q4
- Pension commitments increased to approx. €45 billion in Q4
Eric Uijen, chairman of the executive board: “It has been a year of many faces. After years of no indexation, we managed two increases this year. This was perhaps thanks to the relaxed rules in the run-up to the new pension system. This inconsistency is difficult to explain in view of the losses in the stock market. But our commitments decreased more. Although I am happy to be able to once again make some increases, the economic and international situation in which we are doing this is worrying. The unprecedented high inflation is making it difficult for participants and pensioners. I therefore hope that we reach some more tranquil economic waters in 2023.”
Last hurdle for Future of Pensions Act
Just before the Christmas holidays, the House of Representatives approved of the Future of Pensions Act. It has taken many years of careful work to get here. The act was improved further during the last review rounds. There is now a good act which has to go to the Senate.
Eric Uijen, “I am pleased that one of the last hurdles has now been cleared. It makes the future of our system more certain. This is good for the participants and all organisations involved. It is now up to the Senate. I expect them to assess the legislation with the same care as their colleagues and to reach the same conclusion. Any further delay would be disastrous for people’s trust in the system and could even impede any further pension increases.”
Capital stabilising and commitments increasing slightly
PME's total capital rose slightly from € 49.28 billion to € 49.75 billion at the end of 2022. The increase of 0.73% is due to the return portfolio, whereby shares and high-interest securities resulted in returns of 5.5% and 2.51% respectively. Property made a loss of 2.5% due to the adjustment of the appraised value by, for example, the increasing interest rate.
PME's commitments compared to the third quarter have increased from € 42.86 billion to € 45.05 billion. The funding ratio was 110.4% at the end of 2022.
Marcel Andringa, executive director of balance sheet and asset management: "This year experienced unprecedented high inflation, caused by the increased demand after COVID19, unreliable gas supplies and the war in Ukraine. Due to inflation, interest rates increased worldwide as well. Dutch funds lost almost 300 billion in 2022 as a result of this situation. An unprecedented amount, but one that can be absorbed thanks to the returns that had been realised since 2008 and the long-term investment strategy of the funds. The last two quarters of 2022 also show this at PME, where the capital has since stabilised.”