ANNUAL REPORT 2013
CONTENTS CONTENTS
Foreword 4 Key figures Contribution and indexation policy
8 12
Results 14 Integrated risk management
17
Governance 19 Decisions since balance sheet date
21
FOREWORD TOUGH TIMES FOR THE ECONOMY The economic situation in the Netherlands remains difficult. The number of companies in the metalworking and mechanical engineering sector (Metaal en Techniek) has shrunk by more than 1,000. The number of jobs – and hence the number of members contributing to the pension fund – is down by approximately 15,000. Although the first signs of an upturn in the economy became apparent at the end of 2013, there is still a long way to go and the road ahead is full of uncertainty. Businesses have been hit by the length of the crisis and are reaching the limits of what they can do to address the difficult economic circumstances. Businesses which are able to spot opportunities are still having problems raising borrowed capital. Without access to credit, it is difficult to take initiatives forward.
PENSION CUTS HIT PEOPLE HARD At the end of 2012, it became clear that the recovery plan drawn up by PMT in 2009 was not going to work without additional measures. As a last resort, it would be necessary to reduce all accumulated pension rights and benefits already in payment. This was a very painful decision to take for the PMT Management Board. The 6.3% cut in pensions and pension rights in April 2013 was a hard blow – hitting pensioners in the first instance. They noticed an immediate impact on their finances. The average retirement benefit fell by around €20 net per month, with those on early retirement pensions losing an average of €70 net per month. Pensioners also saw further erosion of their spending power as a consequence of the tax changes brought in by the government. Those still in employment and their employers were also hit by the cuts. In many cases, postponing retirement is the only way of making up for the reduction. Employees will have to work for about an extra six months in order to compensate for the 6.3% cut. A reduction of this magnitude severely dents confidence in the pension fund. Since, at the end of 2013, it was again found that PMT’s funding ratio was marginally below the desired level, the PMT Management Board had to consider another reduction in pensions and accrued rights. Various measures were taken by PMT in the course of 2013 which made the pension scheme more sustainable in financial terms. Coming into effect from the beginning of 2014, for instance, the pension accrual rate was reduced to 1.9% while the level of contributions remains unchanged. From 2014 onwards, this will have the effect of yielding a margin that will allow the small funding deficit to be cleared. The ratio of employers’ contributions to employees’ contributions has also been changed, with employers paying a larger share of the total contributions made. This increased level of contributions from employers means that the support for the overall pension scheme among employees, which had taken a knock due to the pension cut, was not further eroded. The PMT Management Board, accordingly, did not intend, as at year-end 2013, to implement a second reduction. However, the Nederlandsche Bank (DNB) was of the opinion that the measures taken by PMT had not been implemented soon enough, in that the supplementary measures did not come into effect until 2014, stating its position as follows: ‘In the opinion of the Nederlandsche Bank, after a recovery period of five years, the funding ratio should have been restored by 31 December 2013’. It is with the greatest reluctance that PMT must reduce the pensions. The 0.4% cut in the pensions will be implemented with effect from 1 May 2014. As soon as PMT’s financial situation permits, this reduction will be reversed.
4 |
Annual report 2013
The necessary clarity regarding the new financial framework for pension funds is taking longer to emerge than was previously indicated. As at year-end 2013, there continued to be confusion surrounding the framework of standards that would be applicable as from the beginning of 2015, although it was clear what the ‘Witteveen’ framework would look like from 2015 onwards. The reduction in the pension accrual rate to a maximum of 1.875%, coupled with a normal retirement age of 67, represents a sharp setback for the PMT pension scheme. And, for those earning in excess of €100,000 per annum, pension contributions cease to be tax-deductible. The impact this will have for the metalworking and mechanical engineering industry is not as great as that of the other austerity measures in the Witteveen framework. It will be up to the two sides of industry to decide whether to introduce special pension arrangements for employees falling into this category (net of tax).
NEW PENSION SCHEME IN VIEW The talks between employers’ and employees’ organisations on a new pension scheme have not made much progress for some time, partly because of the lack of clarity surrounding the new statutory framework. However, at the end of 2013, the outlines of a new scheme were becoming apparent, an important aspect of this being that it was also becoming clear how the two sides intended to make the new pension scheme future-proof. This covers both those elements to which pension schemes are vulnerable (low interest rates and major upheavals on the financial markets) and the way in which ambitions for preserving the purchasing power of pensions can be realised. The consultations regarding a new, future-proof scheme have had to be conducted in a period during which PMT has been obliged to implement a reduction in the pensions for the first time in the fund’s existence. That does not facilitate discussion of ways of striking a proper balance between ambition and quality and engendering solidarity between young and old. Even so, both sides are continuing to work together on a new scheme, in the knowledge that all stakeholders in the industry will benefit from good collective agreements.
TOWARDS NEW GOVERNANCE STANDARDS… Preparations were also made in 2013 for the changes to the governance of PMT in compliance with the new Pension Fund Governance (Enhancement) Act (Wet Versterking Pensioenfondsbesturen), which comes into operation on 1 July 2014. After careful study of the various models and discussions involving employers’ and employees’ organisations, PMT has opted for the equal-representation model. The challenges facing PMT in the short term demand close relations with the two sides of industry. In the Management Board’s view, the equal-representation model best meets this need. This does not, however, mean that this model will be the one which is ultimately adopted. It will become clear through evaluation whether this model actually possesses long-term resilience. One of the implications of this decision is that pensioner representatives will have two seats on the PMT Management Board. A start was made with recruiting candidates and the preparations for elections to the two available seats at the end of 2013. The elections took place early in 2014 and the two seats have been filled. PMT is accordingly ready to implement the new governance structure in good time. Relations with the pension administrator MN have also been revised and renewed. PMT is to become a direct holder of depositary receipts of MN. The same applies to the other pension funds that are clients of MN. 5 |
Foreword
FOREWORD
NEW PENSION REGULATIONS STILL PENDING
A shared vision and strategy is being developed to further enhance the standard of service provided. This will be achieved by providing additional services and by improving speed of response and efficiency by means of digitisation.
… AND A NEW FUTURE The changes in the law covering both the finances and the governance of pension funds represent a new challenge. Under the new statutory frameworks, PMT’s commitment – to a good collective pension scheme at acceptable cost – will receive a new impetus. Contacts with members and employers will also change. The opinions of both parties will be canvassed more frequently before decisions are made and they will also be able to transact business with PMT via self-service arrangements to a greater extent. PMT needs to win back members’ confidence by living up to its commitments in the years ahead. At the same time, it is important that the major achievements of the existing system should herald a new epoch. This is a demanding task and responsibility to which PMT is fully committed.
Rijswijk, 15 April 2014 Management Board J. Berghuis, chairman representing the employees K.B. van Popta, chairman representing the employers
6 |
Annual report 2013
FOREWORD
7 |
Foreword
KEY FIGURES EMPLOYERS AND MEMBERS NUMBERS
2013
2012
2011
2010
2009
Affiliated employers with staff
33.139
33.714
34.079
33.938
34.420
Contributing participants
384.437
397.675
404.388
400.689
410.842
Non-contributing participants
669.958
661.285
658.158
655.369
642.259
130.731
121.491
113.088
103.158
96.592
11.270
13.362
14.776
16.160
12.888
Participants
Pensioners Old-age pension Early-retirement pension
110
286
600
1.291
5.053
Partner’s pension
53.356
52.144
50.973
49.789
48.579
Orphan’s pension
1.945
2.032
2.006
1.978
1.994
Total pensioners
197.412
189.315
181.443
172.376
165.106
89.687
111.512
102.174
96.532
NB
Early pension
Pensions not applied for 1) Total participants
1.341.494 1.359.787 1.346.163 1.324.966 1.218.207
Pensioners with dependants’ pensions (ANW Pensioen) 2) Surrenders 3)
1.134
1.071
1.006
940
871
37.881
15.902
14.133
10.421
10.759
33.960
33.102
32.320
33.694
32.555
41,0
40,7
40,4
40,4
39,9
Contributing participants Average salary (euros) Average age (years)
PENSION LIABILITIES X 1 MILLION EUROS
2013
2012
2011
2010
2009
20.209
21.560
21.475
17.730
14.842
Pension liabilities Contributing participants
9.064
8.929
8.497
6.870
5.537
Pensioners
17.035
17.196
16.252
14.224
12.685
Total pension liabilities (a)
46.308 4)
47.685
46.224
38.824
33.064
2,85%
2,54%
2,75%
3,44%
3,86%
6
6
–
–
–
Non-contributing participants
Market interest rate for actuarial purposes Provision for VPL arrangements 5)
1) In a departure from preceding years, the number of participants with pension entitlement who have not applied for their pensions has been added to the total number of participants to provide an insight into the number of participants for whom reserves have been recognised for unclaimed pensions. 2) Pensioners with a partner’s pension who are also in receipt of benefit by virtue of their voluntary contributions to the reinsured ‘ANW Pensioen’ product (making up the state benefit under the General Surviving Dependants Act). 3) This includes surrenders before pension date. 4) The pension liabilities and the funding ratio as at year-end 2013 include the expected effect of the recovery measure by which all accrued pension rights and pensions already in payment for all participants, as well as the contingent rights under the transitional arrangements, will be reduced by 0.4%. Prior to application of the recovery measure, the pension liabilities amounted to €46,492 million and the funding ratio stood at 103.8%. This has been explained in greater detail in the report of the Management Board and in the notes to the general reserve in the financial statements. 5) As at year-end 2012, the appropriation of the result for 2012 included the formation of a specific reserve relating to the liabilities under the Early Retirement (Adjustment of Tax Treatment) and Life-Course Savings Schemes Act (Wet VPL). Pending amendment of the Guidelines for Annual Reporting in the Netherlands, the VPL reserve was converted into a VPL provision. The comparative figures have been restated accordingly. In the case of PMT, the VPL provision specifically relates to the contingent rights connected with the transitional arrangements under the new legislation.
8 |
Annual report 2013
2013
2012
2011
2010
1.952
-706
-5.310
-1.242
9
Funding ratio capital (c= a+b)
48.260
46.979
40.914
37.582
33.073
Funding ratio (d = c/a) 4)
104,2%
98,5%
88,5%
96,8%
100,0%
X 1 MILLION EUROS
General reserve (b)
2009
CONTRIBUTIONS X 1 MILLION EUROS
Contribution rates Old-age pension and partner’s pension 6) Contribution amounts Old-age pension and partner’s pension Total contributions
2013
2012
2011
2010
2009
32,3%
32,2%
30,3%
28,6%
27,3%
2.231
2.250
2.071
1.935
1.840
2.231
2.250
2.071
1.935
1.840
78
61
56
58
42
3,5%
2,7%
2,7%
3,0%
2,3%
Contribution receivables Contributions receivable Contributions receivable as a percentage of total contributions
4) See footnote 4 on page 8. 6) Contributions are charged at this rate on that part of the participant’s annual pensionable salary which lies between the contribution-free allowance of €15,904 (2012: € 15,632) and the upper limit in 2013 of €79,176 (2012: 77,388). Contributions are charged at 24.3% on the pensionable salary in excess of the upper limit.
9 |
Key Figures
KEY FIGURES
CAPITAL USED IN CALCULATING THE FUNDING RATIO
PAYOUTS 2013
X 1 MILLION EUROS
2012
2011
2010
2009
Old-age pension
765
721
642
570
515
Early retirement pension
332
398
439
422
315
3
6
15
67
175
178
177
169
161
153
Early pension Partner pension
3
3
3
3
3
13
12
11
11
10
1.294
1.317
1.279
1.234
1.171
43
28
25
18
18
1.337
1.345
1.304
1.252
1.189
6.065
6.143
5.931
5.712
5.508
26.973
28.304
28.411
29.067
29.150
Partner pension
3.381
3.436
3.348
3.267
3.190
Orphan’s pension
1.492
1.480
1.452
1.432
1.411
Surrenders
1.147
1.764
1.751
1.738
1.660
2010
2009
Orphan’s pension ANW Pensioen Subtotal Surrenders Total payouts
Average payouts (euros) 7) Old-age pension Early retirement pension
OTHER RESULTS X 1 MILLION EUROS
Results from investments Inward value transfers Outward value transfers Total management costs (invested capital) Integrated management costs (invested capital)
2013
2012
2011
479
5.174
2.647
3.854
4.301
9
52
-2
20
77
28
-
23
1
2
174
214
206
210
NB
243
296
316
322
NB
7) With the exception of the surrenders, with effect from the beginning of 2012, the presented averages relate to the total amounts paid out, divided by the average numbers of pensioners. The comparative figures for 2009–2011 have been restated on the same basis.
10 |
Annual report 2013
INVESTMENTS 2012
2011
2010
2009
Fixed-income securities
28.467
27.653
23.392
19.897
17.443
Equities
11.733
9.909
8.135
8.468
7.464
Composition of portfolio at year-end 8, 9)
4.382
4.872
4.448
4.290
3.753
3.640
4.511
4.908
4.870
4.358
Total invested capital
48.222
46.945
40.883
37.525
33.018
Composition of portfolio at year-end 8) Fixed-income securities
59,0%
58,9%
57,2%
53,0%
52,8%
Equities
Real estate Alternative investments
24,3%
21,1%
19,9%
22,6%
22,6%
Real estate
9,1%
10,4%
10,9%
11,4%
11,4%
Alternative investments
7,6%
9,6%
12,0%
13,0%
13,2%
Total invested capital
100%
100%
100%
100%
100%
Total return per asset class 9) Fixed-income securities 9)
-5,5%
13,1%
15,5%
9,6%
11,3%
Equities
15,8%
16,3%
-5,9%
20,3%
39,3%
Real estate
3,3%
9,6%
2,7%
10,1%
-2,0%
Alternative investments
8,9%
5,9%
1,1%
8,0%
13,3%
Direct return
3,6%
3,5%
3,6%
3,2%
3,6%
Total return
1,0%
12,6%
6,9%
11,6%
15,1%
Z-score for year
0,75
0,73
0,76
1,40
1,06
Benchmark test 10)
3,38
1,15
1,33
1,47
1,56
Split of return on total invested capital
Z-score
8) The asset classes (value and returns) are presented in the key figures and the report of the Management Board in the same way as in the strategic investment policy. This means that profits related to derivatives, cash and cash equivalents and foreign exchange are allocated to the respective asset class, with the result that the invested capital and investment return in the key figures differ from the financial statements. Investments are presented in the balance sheet and the profit and loss account on the basis of the type of financial instrument. One effect which this has is that part of the invested capital is shown in the balance sheet under other assets and liabilities (instead of Investments). 9) Including duration overlay. 10) The benchmark test provides a measure of the extent to which the investment return actually achieved over a period of five years differs from the investment return on the benchmark portfolio over the same period. To assess the benchmark test, a figure deriving from the result of the calculation (as stipulated in Schedule 1 to the Exemptions and Penalties Decree under the Occupational Pension Scheme (Obligatory Participation) Act ( Wet Bpf) 2000) plus 1.28 is disclosed. The benchmark test is satisfied if the stated result is greater than or equal to zero.
11 |
Key Figures
KEY FIGURES
2013
X 1 MILLION EUROS
1 CONTRIBUTION AND INDEXATION POLICY CHANGES TO THE PENSION SCHEME IN 2014 New legislation coming into operation in 2014 , combined with the financial position as at year-end 2013, has obliged PMT to amend the industry-wide pension scheme for the metalworking and mechanical engineering sector in various respects. The main changes for 2014 are: • The rate of pension accrual for the old-age pension up to the limit of €80,087 will be reduced to 1.90% (2013: 2.236%); • The contribution-free earnings level has also been adjusted downwards to €15,554 (2013: €15,904); • The rate of accrual for the old-age pension above the limit will be reduced to 1.63% (2013: 1.75%); • With effect from 2014 onwards, the maximum award under the transitional arrangements will be 85%, eliminating the undesirable side-effect due to longer life expectancy; • The CLA for the metalworking and mechanical engineering industry included agreement on a redistribution of the burden of pension contributions in favour of employees. The employees’ share in 2014 will be a maximum of 36.8% of that portion of salaries in excess of the contribution-free allowance of €15,554 up to the limit of €80,087 (2013: 46.80%).
ANNUAL INCREMENTS PMT makes every effort to preserve the purchasing power of pensions and accordingly attempts to increase the accrued pension rights by a certain percentage each year. This increase is also referred to as the annual increment. This is not an entitlement. The annual increment is only granted if warranted, in the opinion of the Management Board, by PMT’s financial situation. PMT pays future increases out of the investment returns; they are not funded by contributions. Annual increments relate to the old-age pensions, the dependants’ pensions (partner’s and orphan’s pensions) and the ‘ANW Pensioen’. For contributing participants, the pension fund attempts to increase the pension each year by the same amount as the general pay rise for the metalworking and mechanical engineering industry agreed in the respective CLAs, as reported by the Union Executive for the Metalworking and Mechanical Engineering Industry (the wage index). This percentage increase is calculated year-on-year in January of the current year relative to January of the preceding year. For pensioners and non-contributing participants (deferred pensioners), pensions are increased if possible by the amount of the Consumer Price Index for All Households (derived). This inflation index is calculated year-on-year from July to July. In recent years, the accrued pensions of contributing participants have not been increased. A full increment was last granted in 2008, plus an increase of 1.36% forgone in prior years. Deferred pensions and pensions already in payment have not been increased either for the past six years.
12 |
Annual report 2013
Again, a full increment was last granted in 2008, increased on that occasion by 1.5% in respect of increments previously forgone. As at the start of 2014, the cumulative amount of increments not received is 13.10% in the case of contributing participants and 11.36% for pensioners and former contributors.
CONTRIBUTION RATE POLICY
With effect from 1 January 2014, employers will be paying a greater share of the pension contributions. Up to the limit (€80,087), employees will not pay more than 36.8% of the total contributions. Above the upper limit, employees pay a maximum of 46.8% of the total. The increase in the employers’ contribution stems from the agreement in the Metalworking and Mechanical Engineering Sector CLA that employers would pay the contributions for the contingent transitional rights (under the VPL legislation).
1) The smoothed cost-covering contribution rate for 2014 is 30.2% of pensionable salary up to the limit, based on a smoothed interest rate of 3.25%. Above the upper limit, the smoothed rate is 23.7%. In 2013, these contribution rates were 31.9% and 24.1%, respectively, based on a smoothed interest rate of 3.50%.
13 |
Contribution and indexation policy
CONTRIBUTION AND INDEXATION POLICY
The contribution rate in 2014 has been held at 18.1% of pensionable salary. The total amount of the contribution percentage covers the basic scheme and the VPL scheme combined. This in turn means a cost-covering level of contributions plus a small recovery mark-up, giving an overall contribution rate of 31.2% of the pension base in 2014. The pension base is that part of the salary in excess of the contribution-free allowance of €15,554 up to the limit of €80,087. The increase in the contribution-free allowance equates to the average increase in state retirement pension (AOW) and collective labour agreement (CLA) wage levels. For salaries in excess of the upper limit of € 80,087, a lower rate of accrual applies and the contribution rate is 23.7%. In 2013, these contribution rates were 32.3% and 24.3%, respectively. 1)
2 RESULTS Once again in 2013, PMT’s result on investments was positive. Invested capital increased from €47 billion to €48.2 billion. The rise in interest rates produced a fall in the liabilities. This lifted the results achieved and improved the funding ratio in 2013, while the further increase in life expectancy had a negative impact on the funding ratio. The funding ratio presented as at year-end 2013 includes the effect of the 0.4% cut in pensions that will be implemented with effect from 1 May 2014.
RESULTATEN 2013 The results for 2013 can be summarised as follows:
RESULTS (X 1 MILLION EUROS) CONTRIBUTIONS
2013
2.231
2.250
479
5.174
-1.337
-1.345
1.377
-1.461
0
-6
PENSION ADMINISTRATION COSTS
-64
-56
OTHER
-28
48
RESULT ON INVESTMENTS PAYOUTS MOVEMENTS IN PROVISION FOR PENSION LIABILITIES MOVEMENTS IN OTHER PROVISIONS
BALANCE OF INCOME AND EXPENSES FUNDING RATIO AS AT YEAR-END
2012
2.658
4.604
104,2%
98,5%
//////////////////////////////////////////////////////////////////////////////////////
14 |
Annual report 2013
TOTAL ASSET MANAGEMENT COSTS (IN BASIS POINTS RELATED TO AVERAGE INVESTED CAPITAL) 2013
2012
2011
2010
% of managed assets
Euros (million)
% of managed assets
Euros (million)
% of managed assets
Euros (million)
% of managed assets
DIRECT COSTS 1)
81,0
0,184%
74,6
0,170%
64,0
0,167%
61,1
0,173%
FIXED MANAGEMENT FEES
77,9
0,177%
71,9
0,164%
62,1
0,162%
59,0
0,167%
PERFORMANCE-RELATED MANAGEMENT FEES COSTS ACCOUNTED FOR IN FUNDS 2) FIXED MANAGEMENT FEES
3,1
0,007%
2,6
0,006%
1,9
0,005%
2,1
0,006%
86,5
0,197%
132,4
0,301%
137,5
0,358%
145,7
0,411%
69,3
0,158%
90,5
0,206%
96,4
0,251%
100,5
0,284%
17,2
0,039%
41,9
0,095%
41,1
0,107%
45,1
0,127%
6,3
0,014%
7,2
0,016%
4,1
0,011%
3,7
0,010%
6,3
0,014%
7,2
0,016%
4,1
0,011%
3,7
0,010%
-
0,000%
-
0,000%
-
0,000%
-
0,000%
173,7
0,396%
214,1
0,488%
205,6
0,536%
210,5
0,594%
TRANSACTION COSTS 4)
51,5
0,117%
58,6
0,134%
79,8
0,208%
76,1
0,215%
RELATING TO OPERATIONAL PORTFOLIO MANAGEMENT RELATING TO STRATEGIC REBALANCING DRILL-DOWN TO COSTS ACCOUNTED FOR IN UNDERLYING INVESTMENT FUNDS 5) COSTS ACCOUNTED FOR IN FUNDS AGGREGATE MANAGEMENT COSTS
36,6
0,083%
44,0
0,100%
44,8
0,117%
52,2
0,147%
14,9
0,034%
14,7
0,033%
35,0
0,091%
23,9
0,067%
17,4
0,040%
23,1
0,053%
31,0
0,081%
35,0
0,099%
17,4
0,040%
23,1
0,053%
31,0
0,081%
35,0
0,099%
242,6
0,513%
295,8
0,674%
316,4
0,824%
321,6
0,908%
1,05%
43.914,4
12,60%
38.392,1
6,95%
35.412,7
11,95%
PERFORMANCE-RELATED MANAGEMENT FEES OTHER COSTS 3) CUSTODY, CONSULTANCY AND AUDIT FEES COSTS ACCOUNTED FOR IN FUNDS TOTAL MANAGEMENT COSTS
47.258,5 7) AVERAGE INVESTED CAPITAL AND NET RETURN OVER CALENDAR YEAR 7)
1) The direct costs are costs invoiced to the pension fund. These costs are recognised in the financial statements. 2) The costs accounted for in funds are costs charged to individual investment funds under the terms of those funds. These costs are accordingly not separately invoiced to the pension fund but are accounted for in the investment results. 3) The other costs are costs essential to the pension fund’s asset management operations but not counted as management costs as such. They concern, for example, securities custody fees and fees charged by professional advisers, valuers and auditors. 4) The transaction costs are calculated on the basis of actual transaction charges or by applying the average spread over the period for a particular financial instrument to the actual transaction volumes in that instrument. 5) The drill-down to the costs accounted for in the underlying investment funds has been arrived at on the basis of a pro rata allocation of the operating expenses in the financial statements according to PMT’s share in the investment fund concerned. 6) The average invested capital has been calculated on the basis of the capital as at the end of each quarter, taking account of deposits and withdrawals. The net return is the actual gross return achieved less all costs. The net return is the increase in the capital over the period concerned. 7) PMT’s aggregate costs including transaction costs in 2013 amounted to €306.2 million. This amount is made up of the €242.6 million shown above for asset management and the pension scheme administration costs totalling €63.6 million, as disclosed on page 112.]
15 |
Results
RESULTS
Euros (million)
3 INTEGRATED RISK MANAGEMENT The importance of good risk management has become increasingly evident in recent years and tighter control of risks was once again something which marked 2013, including reducing risk within the investment portfolio where necessary. This covered, for example, a structural reappraisal of specific assets classes, such as real estate and fixed-income securities in emerging markets. This exercise began with an examination of the long-term added value and extended right up to the operational matters concerned with asset manager mandates.
PMT RISK ACCEPTANCE STATEMENT PMT’s mission, vision and core values form the basis for the level of risk accepted by PMT. Additionally, PMT conducted a risk appetite survey among participants in the scheme and existing pensioners in 2013, which showed a clear preference for a secure pension, and therefore a high level of risk management, on the part of the majority of PMT members. The conclusions have been combined into a PMT Risk Acceptance Statement. This Statement answers the question: ‘What is the risk profile which simultaneously allows the ambition to be realised while ensuring that the downside implications of accepting risk are adequately mitigated?’ The Risk Acceptance Statement focuses on the two main processes of the pension fund – pension administration and asset management – and functions as an integrated strategic compass. The Statement provides direction for fundamental decisions affecting both policy and the implementation of policy. In other words, it lays down the degree of risk PMT is willing to accept, how PMT ensures that the risks and the management thereof are clearly understood and how PMT will respond in the unlikely event that it has to contend with adverse consequences.
17 |
Integrated risk management
INTEGRATED RISK MANAGEMENT
Against the background of the negotiations concerning an amended pension scheme for the metalworking and mechanical engineering sector and in view of the current financial position of PMT, the Management Board has subjected its risk acceptance in relation to the long-term ambition and contribution rate for the scheme to in-depth scrutiny and revision.
4 GOVERNANCE 2013 was marked by the decisions in connection with the implementation of the Pension Funds Code with effect from 1 January 2014 and the Pension Fund Governance (Enhancement) Act, coming into force on 1 July 2014. Based on a comprehensive strengths and weaknesses analysis, the Management Board has opted for one of the five possible governance models set forth in the Pension Fund Governance (Enhancement) Act, namely the equal-representation model.
A schematic representation of the governance model is as follows:
MANAGEMENT BOARD
8 CONTRIBUTING PARTICIPANTS 4 PENSIONERS 3 EMPLOYERS
<
ACCOUNTABILITY BODY
4 EMPLOYEES 2 PENSIONERS 6 EMPLOYERS Investments Committee Pensions Committee Finance and Risks Committee
ADMINISTRATIVE OFFICE
19 |
Governance
< SUPERVISORY BOARD
3 INDEPENDENT MEMBERS
GOVERNANCE
The Management Board is of the opinion that the challenges facing the Management Board in the medium term (including a new pension scheme) can best be addressed by means of this governance model. The decision in favour of this model is, however, an interim one and not necessarily the final solution. An interim evaluation will have to be made in order to clarify whether this model does indeed offer a future-proof structure for the long term.
DECISIONS SINCE BALANCE SHEET DATE REDUCTION IN PENSIONS IN PAYMENT AND ACCRUED RIGHTS It was finally decided on 9 March 2014 to reduce the pensions and accrued pension rights for all participants by 0.4%. The transitional arrangements facilitating early retirement are accordingly being reduced by the same percentage. In the light of the development in the funding ratio, there was no other way, by that date, of bringing about the necessary recovery of the pension fund. The provision for pension liabilities has been reduced by €184 million following this action. The effect has been recognised in the financial statements as at year-end 2013. The funding ratio is calculated as follows:
FUNDING RATIO (X 1 MILLION EUROS) 2013
2013 BEFORE APPROPRIATION OF RESULT
Provision for pension liabilities (a) General reserve
After reduction
Funding ratio (c = b/a)
Before reduction
46.308
46.308
- 184
46.492
47.685
1.952
- 706
-
- 706
- 706
2.658
184
2.474
48.260
48.260
–
48.260
46.979
104,2%
104,2%
0,4%
103,8%
98,5%
Balance of income and expenses Capital used in calculating the funding ratio (b)
Effect of reduction
2012
CHANGE IN GOVERNANCE STRUCTURE In mid-March 2014, there was a change in the shareholder structure and issue of depositary receipts for shares of Mn Services n.v. PMT retains an interest of 78.3% in Mn Services n.v. Rijswijk, 15 April 2014 Management Board J. Berghuis, Chairman representing the employees
K.B. van Popta, Chairman representing the employers
A.J. Akkerman
F.S. von Balluseck
J.P.M. Brocken
M. Kortbeek
M. Hulsegge
H.J. van Luunen
I. Slikkerveer
A. Th. van Rhijn
21 |
Decisions since balance sheet date
DECISIONS SINCE BALANCE SHEET DATE
The effect of the reduction has been calculated on the basis of the figures as at year-end 2013.