Indexation becomes reality due to interest rate increase
PME's funding ratio rose to 112.4% in Q2. This increase in funding ratio is caused almost entirely by the sharp increase in the interest rate. While still at 1.10% at the end of Q1, it rose to 1.99% in this quarter. The losses in the capital market that were seen early this year continued in Q2, resulting in a negative return of -/- 13.3%.
Key figures Q2 2022
- Current funding ratio as at 30 June 2022: 112.4%
- Policy funding ratio as at 30 June 2022: 107.8%
- Investment return Q2 2022: -/- 13.3%
- Investment return 2022 (up to Q2): -/- 20.1%
- Capital decreased to approx. €51.6 billion in Q2
- Pension commitments decreased to approx. €45.9 billion in Q2
Eric Uijen, chairman of the executive board: "For the first time in 14 years, PME was able to index-link the pensions for all participants, by 1.29%. As of today, pensioners will see this modest increase reflected in their bank account. I realise this is just a drop in the ocean for many. We hope it won't stop here, but interest rates and stock markets are not predictable. Developments in the housing market, the war in Ukraine and a new COVID-19 wave in the autumn could throw a spanner in the works."
Relaxation of the rules on indexation is a fact
In the run-up to the new pension system, the government has decided to relax the rules on indexation. As PME's policy funding ratio exceeds 105%, we have decided to index-link our pensions.
Eric Uijen: "We have always said we would do it as soon as it is allowed and possible. I am very pleased that the rules have been relaxed and that PME is now able to index-link the pensions. This is based on the inflation period
between July 2020 and July 2021. In November we will decide whether indexation is again possible for January 2023. This will be based on the inflation period between July 2021 and July 2022, which reflects the current high inflation rate."
Decrease in capital and commitments continues
PME's total capital decreased further in Q2, from €59.3 billion to €51.6 billion. This decrease is due mainly to negative returns on investments in fixed interest securities and shares as a result of the turmoil in the financial markets caused by the war in Ukraine. In recent weeks, however, PME has witnessed a stabilisation in its capital and a slightly positive return. PME's commitments compared to the first quarter have decreased further. This has resulted in an increasing funding ratio, which in turn has made indexation possible. Due to the increase in interest rates, the value of our commitments decreased from €53.5 billion to €45.9 billion.