Stability, indexation and the future of investing

Comparing pension funds solely on the basis of the return achieved in a single year is of limited value. Each fund has a unique group of participants with its own characteristics and investment goals. Moreover, the return generated in a single year says very little about the financial stability of a fund or the extent to which that fund has been able to retain the value of pensions in the past.

As SSPF moved closer to its long-term goal of maintaining the purchasing power of pensions in the past, the fund gradually reduced its investment risk wherever its financial position allowed, fully in line with its duty of care. As a result, SSPF has achieved a stable financial position in recent years, enabling the fund to grant indexation. Thanks to this robust investment strategy, the funding ratio is now at a historically high level.

If possible, pensions will increase in line with prices

Pension beneficiaries and participants who have left employment but have not yet retired will receive conditional indexation under the current scheme. The benchmark used by SSPF for conditional indexation is the price inflation published by Statistics Netherlands (CBS). Each year, the SSPF board decides to what extent pensions can be increased, and this is only possible if SSPF’s financial situation allows for it. This indexation is funded entirely from the investment returns generated by the fund. To date, SSPF (as one of the few funds in the Netherlands) has been able to keep pace with price inflation for pension beneficiaries and participants who have left employment. As a result, pensions have remained fully indexed.

For participants who are still employed, there is an unconditional increase in pension entitlements based on the price index published by Statistics Netherlands (CBS). The increase for Shell employees is equal to the average increase in this index over the past two years, with a maximum of 5%. Under the current scheme, this unconditional increase takes place every year on 1 February and is paid by the employer via the contribution charged by SSPF.

A focus on certainty for participants over a race for returns

SSPF’s strategy is very deliberate: balancing returns and risk to achieve our aim of maintaining purchasing power of pensions. This is one of the reasons why SSPF has chosen to diversify sufficiently and protect against interest rate and currency risks. The high funding ratio is the very reason why SSPF is able to pursue a balanced investment strategy with moderate risk. This ensures consistent results.

Approximately 24% indexation over the past 5 years, no indexation shortfall

Since 1 February 2022, SSPF has granted around 24% indexation. At SSPF, pensions have remained fully indexed, with no indexation lag. Over the past five years, the nominal funding ratio has remained at a broadly stable level. At the same time, a significant improvement has been achieved in the real funding ratio*.

* Real funding ratio: i.e. the funding ratio that also takes expected future inflation into account. The real funding ratio reflects the extent to which a pension fund is able to meet its liabilities, including the payment of pensions and expected future indexation linked to inflation.

This shows that our strategy is working: not the highest possible returns, but a balanced portfolio with moderate risks that enables pension indexation. In this respect, SSPF is relatively unique. Many pension funds in the Netherlands have not yet been able to achieve full indexation.

Indexation in 2026

In February 2026, SSPF will grant an indexation of 2.8% to the pensions of pension beneficiaries and participants who are no longer employed, and 2.95% to the pensions of active members. SSPF is able to grant this indexation because the fund is in a strong financial position.

This will be the last indexation under the current scheme as we know it, as SSPF is expected to transition to a new scheme under the Future Pensions Act (Wtp) on 1 January 2027.

Inflation that occurs in 2026 will not be disregarded. During the conversion process, this inflation (if known) will be included in the distribution of the SSPF capital among the individual capital amounts of participants.

Future from 2027 onwards

From 2027 onwards in the new pension system, the buffers currently held by SSPF will be allocated among all participants. This allocation is intended to enable a one-off future increase during the transition to the new system.

After the conversion, the investment results for participants who are still actively employed will go directly to those participants. This will ensure greater transparency and a direct link between returns and pension accrual.

Retired participants can opt for a fixed pension with an external insurance company or for participation in the Collective Variable Pension Scheme. This no longer involves indexation based on published price inflation. Instead, pensions are adjusted annually based on the return on investment achieved in the Collective Variable Pension Scheme.

With the introduction of the Wtp, the system is changing and with it SSPF’s investment policy. This policy must also reflect the preferences of all participants. To gain insight into these preferences, SSPF conducted a risk preference survey (RPS) in 2024. The response to the survey was high. Thousands of participants gave their opinions. SSPF participants generally appear to be less willing to take investment risks than participants in other pension funds in the Netherlands. The results of the RPS play an important role in determining the investment risk going forward. The investment policy is determined by the SSPF board on the basis of the results of the RPS, scientific insights and participant characteristics. For example, the fund is not legally permitted to invest with more risk than the results of the RPS allow. SSPF will continue to implement its investment policy in the future based on these principles.

The results of the RPS provide a number of clear insights. Younger participants are more often willing to take greater investment risks, while retirees are more likely to opt for security. SSPF takes this into account by reducing the investment risk as participants get older. It also appears that higher income groups are more often willing to take more risk. Therefore, participants who are accruing pension under the new pension scheme will be able to choose from multiple investment profiles starting in 2027. Participants who are already receiving a pension will be able to choose between a fixed pension from an external insurance company or a variable pension from SSPF starting in 2027. If a variable pension is chosen, the pension capital of a pension beneficiary will continue to be invested after the retirement date. This is expected to result in a higher pension. However, in less favourable times, pension reductions may also occur.

After the transition to the new pension system, SSPF will carry out a new RPS. If this results in further insights, it may lead to a reassessment of the investment policy. The voices of our participants count!

Our promise stands

This approach allows us to continue to do what we promise: provide our participants with as much financial peace of mind as possible. Under the Wtp, our participants will have more options: participants who prefer certainty can opt for a fixed benefit, while those who are willing to take a little more risk (with a higher expected pension) can opt for the CVP.