How is TNO Pension Fund doing?
Kostijn van Gerven, director of TNO Pension Fund, gives his vision of the developments over the past months. What stood out and what does this mean for our Pension Fund?
Dear Reader,
It's a good habit to devote part of the first edition of Life & Pension of the year to a review of developments in the past year and to a look ahead into the future. What did 2019 bring us, and what can we expect from 2020?
2019 brought us records on the stock exchanges, in particular in the last months of the year when the news of a breakthrough in the trade war between the USA and China gave an extra impetus to stock exchange prices.
However, even though the investment results were good, all pension funds’ coverage ratios were under pressure. This was due to the very low interest rates that pension funds must use in the calculation of their pension commitments. On balance, this yields a coverage ratio for our pension fund that is sufficient to avoid pension reductions but is insufficient to allow pension indexation.
What is 2020 going to bring?
I expect that 2020 will be somewhat comparable to 2019. It looks like stock exchange prices will continue to rise, although the rate will probably be lower than in 2019. It also looks like interest rates are going to remain very low in 2020. However, as is the case every year, there are great uncertainties. 2020 is a US election year. Will this impact the stock-exchange climate? The trade war between the USA and China has calmed down, but might still cause an unexpected shock on the stock market. Will Boris Johnson be able to conclude a trade agreement with the EU, or is it still going to be a hard Brexit? And then there's the Corona virus: could the Corona virus cause an economic slump? We just don't know.
2020 might also be the year of the new pension system. Once again, we don't know the precise details of the new system and we don't know how we are going to migrate from the old system to the new system.
What we can do – and have done – is to thoroughly prepare ourselves for every possible development and to keep alert to any changes. Naturally, you can expect me to keep you informed about all the developments in the coming year.
Kind regards,
Kostijn
Kostijn van Gerven
director