Rising prices and the effect on your DB pension
Prices rise almost every year. This is called inflation; your money becomes worth less. As prices rise, we all suffer from loss of purchasing power. We can buy less with the same amount of income. To counteract this, the board decides every year to what extent a supplement is possible on DB pensions. We look at inflation for the previous 12 months (i.e., from September 2021 through September 2022). The board also takes into account SPIN’s financial position and general economic developments when granting it. As you have come to expect from us, you will hear in January whether – and how much – supplement you will receive on your pension. The supplement scheme applies only to the DB pension scheme.
Declining DC investments
In recent months, interest rates have risen sharply. At the same time, stock prices worldwide fell. That combination also caused the value of DC investments to fall. We arrange our investments so that the expected retirement income is stabilized as much as possible. We invest more in bonds than equities just before your retirement date. We do this to minimize the risk of a lower pension from your DC capital.
With higher interest rates, you can buy into a higher pension
The decline in the value of investments is only one side of the equation. Rising interest rates reduce the value of your bonds. But the amount of pension you can purchase with your capital from an insurer actually increases with higher interest rates. The higher the interest rate, the higher the pension you can buy with your capital. When interest rates fall, the exact opposite happens.
The most stable pension possible
Our goal is to ensure that your expected DC pension just before your retirement date remains as stable as possible. Even if interest rates rise or fall. Therefore, every month we monitor how much pension you can buy from different insurers. Compared to a year ago, insurers now give about 27% more pension for every euro of pension capital. So this more than makes up for the current 20% drop in investments. Good to know: this only applies to the DC pension plan.
Wondering how market trends affect your expected retirement? Then log in to MySPIN.