The coverage ratio reflects the fund's financial health. It reflects the relation between PME's assets and the amount needed to cover the cost of all pensions - both now and in the future. Every month we report about our financial position. The coverage ratio determines whether the pensions can be increased or must be cut.
Our current coverage ratio is 111,2%
Coverage ratio higher than 105% (Current situation)Possibly increase pension
The fund is healthy. We may be able to increase your pension.
Coverage ratio between 90% and 105%No change in pension
The fund is healthy, but your pension will probably not be increased.
Coverage ratio below 90%Possibly reduce pension
Our financial position is not good enough. We may have to cut your pension.
What do these coverage ratios mean?
The (current) coverage ratio indicates each month the relation between the fund's assets and the pension payment obligations. The pension payment obligations represent the amount needed to pay out all pensions, both now and in the future. If the coverage ratio is 100%, this means that there is exactly enough money to pay out all pensions.
The policy coverage ratio is the average coverage ratio of the past 12 months. It, therefore, shows the pension fund's financial position over a longer term. As the policy coverage ratio ended just below 100% at the end of 2020, we could use Minister Koolmees's exemption scheme. As a result, the pensions did not have to be cut in 2021. In 2022 pensions stay the same as well.
The coverage ratios in the past 12 months
What is legally required of us?
We are required to have extra reserves in order to weather financial storms. This is an extra buffer. We call this buffer the required equity. This mandatory extra buffer is linked to the required coverage ratio. The required coverage ratio varies for each pension fund, as laid down by the law. We have sufficient buffers when our coverage ratio reaches 118%.
What if the policy coverage ratio drops below the required coverage ratio of 118%? In that case we must submit a recovery plan with De Nederlandsche Bank. In that recovery plan we explain how we plan to restore the coverage rate to 118% within 10 years.
Prepared for possible crisis with our crisis plan
We have a financial crisis plan (pdf, in Dutch) to be prepared for a potential crisis, for instance if the coverage ratio drops so low that the pensions are at risk. Every pension fund is required to have a financial crisis plan.