Qualitative risk attitude

The Board of Trustees and other discussion partners regard a purchasing power protected pension and the achieving the intended pension outcome to be the most important aspects. An average long-term supplementation of less than 40% is seen as unacceptable. The aim is to avoid as much as possible a funding shortfall and the risks of a reduction. An entitlement reduction of 2.5% per year is the maximum and a reduction of 1% is the minimum. The critical limit for the funding ratio depends on the minimum limit at which, as a minimum, the requirements for holding the required own funds within the specified periods set out in a recovery plan can still be met. The minimum policy funding ratio that may occur once every 40 years is 90%. The volatility with regard to the funding ratio is less important. The aim is to achieve a funding ratio after 10 years of at least 130%, whereby in a negative scenario after 10 years a funding ratio in excess of 104% is regarded as important. The characteristics of the strategic investment policy should mean that the wishes with regard to the risk attitude and prioritising of the objective are clearly expressed. In principle, the Board of Trustees does not consider contribution volatility and the level of contribution to be important. After all, financing is based on a self-financing contribution as a result of which the contribution is dependent on the interest rate, which can fluctuate year on year.

The importance of the objective is prioritised, whereby some objectives are reasonably comparable as regards priority:

1. Realisation of a purchasing power protected pension and the intended pension outcome.
2. Minimising risk of reduction measures and the extent of the reduction.
3. Stable funding ratio and maximising the funding ratio.
4. Stable contribution.
5. Minimising the contribution.

Quantitative risk attitude

The short-term quantitative risk attitude is expressed as the amount of legally-required own funds (VEV). At 1 January 2017 these had a value of 16% of the pension fund’s liabilities, with a bandwidth of approximately 4%. The qualitative risk attitude, our own policy assumptions and the adopted quantitative risk standards have been set on the basis of ALM analyses that have been undertaken. The long-term quantitative risk attitude is expressed in the lower limits of the feasibility test adopted by the Board of Trustees.

During initial feasibility test, based on the fund’s financial situation as at 1 January 2016, the following limits were set:

• Median scenario: pension outcome 95%;
• Relative maximum expected pension outcome deviations in bad-weather scenario: 30%
• Median scenario based on funding ratio that meets the VEV: 95%