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“In the autumn, the dollar is already worth as much as the euro. This is the first time in 20 years”

Turbulent investment year

After two corona years, in 2022 financial markets were facing rapidly rising prices and increasing interest rates. As a result, stock market prices were turning dark red. But have these developments affected your pension?

Facing losses

Share and bond markets around the world recorded heavy losses in 2022. Even the share prices of big techs like Amazon, Meta, Alphabet and Microsoft went down by double-digit percentages after years of increases. A downturn caused by rising interest rates. Which means that tech companies had to consider lower future profits which meant the company represented less value in the eyes of investors. Thus over 2022, the US technology index Nasdaq posted a loss of over 33% (in local currencies), the broader S&P 500 fell more than 19% (in local currencies). Having said that, the loss of the AEX - just under 14% - was not too bad.

Pressure from the dollar 

There was also a continued negative effect caused by the increased value of the dollar. Partly this growth in value can be explained by the sharp rise in US interest rates, and partly by a Pavlov reaction in economically turbulent times: the dollar is then seen as a safe haven. Thus, in early 2022, 1 euro still fetched $1.13. By autumn, the dollar was already worth as much as the euro. This for the first time in 20 years.

China's growth falls back

Due to China's strict zero-tolerance corona policy in 2022, China's economic growth saw a sharp decline. Therefore, as the world's export engine, China was less able to supply Western countries with goods and semi-finished products. Global industries, including car manufacturers, were severely affected by chip shortages.

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“Even the share prices of big techs are falling tens of percent after years of increases”
Unprecedented interest rate hikes

For the first nine months of the year in particular, financial markets responded negatively to the historic interest rate rises by central banks. In the last three months, things calmed down somewhat. Capital markets were confident that the inflation had peaked. Quelling inflation by slowing down the economy with interest rate hikes seemed to have worked.

Losses for all Life Cycle investment portfolios

Disappointing returns in both equity and bond markets are also negatively impacting SNPS' investment results. For example, there is a loss for all three Life Cycle portfolios. These are the investment baskets you choose between when you accrue your pension at SNPS and you get the opportunity to take more or less risk with your investments. For example, you can invest offensively with Life Cycle portfolio Return, but also defensive (Matching) and neutral (Interest).

The Collective Variable Pension is the investment portfolio of SNPS, with which you continue to invest after retirement. This portfolio not only depends on the investment results of one year, but spreads it over a period of five years. As a result, even after such an extremely turbulent investment year as 2022, you will not have to deal with a pension reduction. Indeed; due to the positive results in previous years, there is a small plus in the pension benefits.

Life Cycle portfolio Return - consisting of 70% shares in developed and emerging markets and listed real estate (as well as 30% High Yield bonds/government bonds of emerging market countries) scored a result of almost minus 14%.

Life Cycle portfolio Interest - made up of creditworthy corporate bonds - scored a minus of 11%.

Life Cycle portfolio Matching - consisting of long-term government bonds (which are extra sensitive to interest rate increases) - scored a minus of nearly 37%.

Due to the rise in interest rates purchasing pension becomes cheaper

Accruing your pension not only depends on the return from investments. The purchase price of your pension also plays a role. With rising interest rates, the purchase price becomes more advantageous, because from that moment on less financial reserves need to be held for pension payments to pensioners. With an interest rate increase of 1%, for example, you can buy in roughly 12% more pension with 1 euro of pension capital.

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“Due to strict corona policy, China, as the export engine of the world, is less able to supply Western countries with products and semi-finished products”
Small plus in pension benefits

For SNPS pensioners, who continue to invest with the Collective Variable Pension, the negative investment results from the past year have not had an adverse effect on their pension benefits. Instead of a pension reduction, there is even a small increase. How did that happen? With the Collective Variable Pension you are not dependent on one investment year, but rather results are spread over a period of five years.

SNPS investment policy improvements survey

Shell Pensioenbureau Nederland regularly conducts studies to determine whether SNPS' investment policy is still in line with the expectations of participants. In the past year, there was an additional reason for this, because the invested assets increased significantly and, as a result, new investment opportunities came within reach. For this reason, the following actions were taken in 2022:

  • Research started on participants' investment risk tolerance, the question being, is it still adequately aligned with the Life Cycle investment portfolios?
  • SNPS investment beliefs have been tightened, which form the basis of the investment policy.

  • Life Cycle portfolios Return and Interest optimised: more attractive and robust.
  • Selection started for another euro credit investment fund. With the objective: achieving a better match between the pension fund's investment beliefs and ESG ambitions.