0% indexation
Since 1 January 2024, pensions have not been indexed. Last year, the indexation was very high, and now it’s zero. Why is that?
First, we look at inflation over the year. For this purpose, the board uses the Consumer Price Index excluding product-related taxes (CPI derivative) for the period October to October. The CPI derivative for the period October 2022 – October 2023 was -2.02%, which means it was a period of deflation (price decreases). For this reason, we’re not indexing your pension, nor are we reducing it to reflect lower prices. That’s why the indexation from 1 January 2024 is 0%.
Unlike last year, prices have fallen. TNO Pension Fund bases its indexation on the CPI derivative from October to October. Indexation is 0%.
If prices had increased, a number of legal guidelines would also have to be taken into account. To index your pension, the policy funding ratio must be at least 110% for partial indexation. The financial condition of the Pension Fund has to be healthy (100% is just enough money to pay the pensions). Furthermore, we may only fully index your pension if the policy funding ratio is more than 140%.
There is an indexation backlog
Since 2008, we’ve regularly been unable to index pensions, or apply full indexation. This is reflected in the accumulated indexation backlog. Since the 2008 financial crisis, TNO Pension Fund reserves have not grown enough for partial or full indexation. For this reason, indexation in 2020 and 2021 was 0%. In other years, indexation was limited. On the other hand, pensions were fully indexed in 2022 and 2023, with increases of 3.28% and 16.93% respectively. Taking all things into account, an indexation backlog of 12.7% has been accumulated.
However, after 15 years the first indexation backlog no longer applies, so the first backlog of 3.3% will be ignored. This means that an accumulated indexation backlog of 9.1% will still be applied as of 1 January 2024. The figures for recent years can be found here (Dutch) on our site. This also shows that the negative indexation of 2024 has not been deducted from the retroactive indexation.
Outlook
It remains to be seen if we can continue to index your pension in the coming years. Changing the investment strategy is not a solution because we would need to take bigger investment risks, something we want to avoid. Higher risks might result in you getting a higher pension, but there’s also a higher chance you’ll get less. We don't want you to have to give up your pension, so our options are very limited. We want your pension to retain its value at reasonable costs and an acceptable risk.
Follow the developments
Stay informed about trends in our policy funding ratio: follow TNO Pension Fund via LinkedIn.
