The policy funding ratio at the end of 2017 was above the required equity of 131.9%. As a result, Mars Pensioenfonds was finally out of recovery. As of 1 January 2018, we were able to increase the pensions in payment with a partial supplement. If the policy funding ratio remains above the required level, we can grant a full supplement as of 1 January 2019.
Recovery mainly through investment returns
At the end of 2016, our policy funding ratio was still 116.6%. By the end of 2017, it had increased to 132.3%. This recovery is mainly due to the investment results. In 2017, we achieved an average return of 4.5%. In addition, the slightly higher interest rate had a positive effect on the funding ratio. As a result, the liabilities decreased in 2017. The interest rate may have risen slightly but, historically, it is still very low.
The policy funding ratio in brief
The policy funding ratio is the average of the current funding ratios of the last twelve months. This figure is important for all important policy decisions, such as determining whether a fund is out of recovery, how much premium should be paid by the company into the pension fund, and how much supplement can be granted.
Pensions partially increased as of 1 January 2018
As of 1 January 2018, we were able to increase the pensions in payment with a partial supplement. A full surcharge was not yet included. At the end of 2017, the policy funding ratio was above the required equity capital (approx. 132%). This is an important condition for granting a full supplement. But Mars Pensioenfonds makes the indexation decision every November. And this is based on the index and the policy funding ratio of September of that year.
Because the policy funding ratio was still below the required capital in September 2017, the indexation was slightly below 75% of the price index. If the policy funding ratio is above the required level at the end of September 2018, we can increase the pensions in payment as of 1 January 2019 with a full supplement.
How does raising pensions (additional supplements) work
If we exceed the required equity capital, we can increase the pensions with a full supplement. The full indexation is 75% of the increase in the price index and is a maximum of 3%. Read more about indexation.
End of recovery plan
Our fund had to submit a recovery plan at the beginning of 2009, after we ended up at a historically low funding ratio (just above 105%) at the end of 2008 due to the financial crisis and the continuously falling interest rates.
This meant that we were just short of funding shortfall (each fund must have at least about 104% funding ratio), but we no longer had the required buffer. In view of our investment policy, De Nederlandsche Bank (DNB) wants us to maintain a buffer of more than 30%.
We have now completely rebuilt this buffer. We therefore do not need to update the recovery plan for 2018. If we do fall below the required power limit, we may have to submit a new recovery plan again.
The return in 2017
Finally, a word about investments. The financial markets have performed better than we expected. In these turbulent times, it remains important to spread risks well. A good return of 7.5% was achieved in 2016 under difficult circumstances. Unfortunately, the result for 2017 was somewhat lower at 4.5%, but still positive and this certainly contributed to the improvement of the funding ratio of the fund.
Would you like to stay informed about the financial situation of Mars Pensioenfonds? Then check the website around the 20th even every month. There you will find the latest policy funding ratio every month. And if there is other important news, we will of course report that too.
Regards, also on behalf of the rest of the board,
William of Ettinger
Chairman of the Board of Mars Pension Fund