UK convenience translation
Potential reduction of pension benefits
You have probably already seen it in the media. Almost none of the pension funds in The Netherlands are doing well at present. As a result of the continuing financial crisis, in the second half of 2011 many pension funds slid even deeper into trouble than they already were. This is primarily driven by the historically low interest rate, which pension funds are using to calculate the funding ratio. The problems are so severe that De Nederlandsche Bank (DNB) estimates that about 125 pension funds will have to reduce their pension benefits. Unfortunately, SPEO is also facing this scenario.
Situation of SPEO
We are still working on the calculation of the precise level of SPEO’s funding ratio as at 31 December 2011, but it is estimated at 90%. This means that at this moment for every euro of pensions to be paid out now and in the future, we have pension assets of only 90 cents.
Recovery Plan
As you know, the funding ratio of our pension fund has been too low since 2008. In March 2009, a ‘Recovery Plan’ for restoring the fund’s financial position was submitted to DNB. This Recovery Plan describes how SPEO expects to grow to a funding ratio of 105%, the minimum value set by DNB, within five years. At the end of each year a formal assessment is performed whether the pension fund is still on track with the recovery plan. However, mainly because of the low interest rates, our funding ratio is falling behind substantially on the recovery path outlined in the Recovery Plan. SPEO is therefore now legally required to announce that in the event the funding ratio is insufficiently recovered by the end of 2012, additional measures need to be taken. One of the potential measures is the reduction of benefit entitlements. If a reduction is actually necessary, the Board of Trustees and the employer will aim for a balanced solution that does justice to the interests of all the parties involved in our pension scheme.
At present, we are still working hard on calculations in order to determine the amount of an intended reduction as of 1 April 2013. This will probably be about 4%. Any reduction will be of a provisional nature. That means that it will not take effect right away, but will only be implemented if the situation does not improve during 2012. If the fund’s position has not improved by 31 December 2012, the intended reduction will actually be implemented from 1 April 2013.
Discussions with the employer
SPEO is currently conducting constructive talks with the employer about additional measures, with the intention to achieve a balanced solution for all stakeholders. Other factors may play an important role in this discussion, such as the interest rate development, the implementation of the new pension agreement en the potential consequences for our pension fund.
Communication
SPEO is required to submit an adjusted recovery plan to DNB on 10 February 2012. This must include the additional measures that will provide for the timely recovery of the fund. The adjusted recovery plan will be submitted to the Members’ Council for advice before that time.
We understand that this message could give rise to all sorts of questions about the consequences of this for your pension. We will inform you by letter in detail in mid-February about the employer’s position and the size of a possible benefit reduction per 1 April 2013.
Any questions you may have can be addressed to info@speo.nl .
The Board is well aware of the seriousness and the impact of any reduction in the pensions. We therefore greatly regret this situation and are doing all we can to improve the financial position in a responsible manner.
The Board of Trustees
