“You don't want to change course too quickly, we’re focused on long term goals”

Martin ten Brink

After two strenuous years of Covid-19, war broke out in Ukraine in 2022. This triggered an economic chain reaction leading to soaring energy prices, high inflation, a substantial rise in interest rates and negative returns on almost all asset categories. What are the consequences for SNPS? Board member Eveline Smeets and chairman Martin ten Brink look back on 2022.

Eveline"Looking back, we can only reach the conclusion that 2022 was a very hectic year. Fortunately, Covid-19 came to an end. But the war in Ukraine plus disruptions in the supply chains led to huge price increases of energy, food and other products. Resulting in huge inflation and steep interest rate hikes by central bankers."

"Given the military violence of Russia, this was the only logical step for the board”

Martin: "It was definitely a hectic year. And then there is always the temptation to immediately take action, and start adjusting matters. We were quite right to do that this spring where our investments in Russia were concerned: we divested those. And we will not make any new investments there either. Given Russia's military brutality, this was the only rational course of action for the board. The war has not only had far-reaching consequences for citizens over there, but it also had an impact on the entire global economy. As a board, we therefore asked ourselves what the negative returns on the stock market and an unprecedented high inflation meant for our investment policy. Our conclusion was: you don't want to change course too quickly. We’re focused on long term goals." 

“A substantial group of participants would be quite happy to invest more offensively than they are currently doing”

Eveline Smeets

If the stock markets fall, your pension pot will also go down 

Eveline"Those returns were indeed disappointing. Nearly all asset classes were hit. For SNPS, this meant that our participants, regardless of whether they opted for an offensive, neutral or defensive Life Cycle profile, achieved a negative result over 2022; that was exactly the reverse of the year before. But there is also good news: as interest rates have risen, purchasing pensions, for participants who are accruing, has become cheaper. With SNPS, we have been working according to the flexible pension contract from the start, the first pension fund in the Netherlands to do this; this means we are already pretty much 'prepared' for the new pension system. The underlying principle of which is that pensions follow stock market returns more closely, which indeed you can see already quite clearly at SNPS. If the stock markets fall, then your pension pot goes down too; that's not always good news, but very understandable for participants. With the note that as the participant gets older, his or her investment mix is less risky than for a younger person. As you get older, less is invested in shares so you are relatively less affected by falling share prices."  

"We have been working with SNPS since the start according to the flexible pension contract, as the first pension fund in the Netherlands”

Martin: "This strategy contributes to our key task of ensuring a good, solid pension for all SNPS participants, including pensioners, former participants and employees who are currently accruing pension."

“A large part of the participants will not notice the bad stock market year 2022"

Martin ten Brink

CVP participants less affected by rises or falls in interest rates

Eveline"This is also the case for our participants who have opted for the Collective Variable Pension (CVP). There, we work with a balanced portfolio, where the interest-sensitive part of the investments follows the value development of the liabilities. This means participants are less affected by increases or decreases in interest rates. As a participant in the CVP, you also continue to invest in shares after your retirement age, with the aim of increasing your pension over time. With CVP, we look at the nominal funding ratio: this unfortunately ended below 100% in 2022 due to negative returns on shares. In the years before, we had a  plus, and we spread that return over a five-year period. A large part of the participants did not experience much, if anything of the negative returns over 2022: their pension benefits did not have to be reduced, thanks to the positive returns from the past. Whereas our aim continues to be to increase pensions in the long term."

"A large part of the participants will not notice anything in 2022: thanks to the positive returns of the past"

Martin: "This is one of the reasons why it is good that we launched an Asset & Liability Management study for SNPS over summer; we carry out this ALM every three years, in order to balance our long term investments as much as possible with the preferences, ages and other characteristics of our participant population. Moreover, this helps us to optimise the set-up of our investment mix; in other words, we look at whether the three Life Cycles we currently have on offer still match the expectations and options of our participants. This ALM study gives us a thorough understanding of the correlation between strategy followed by SNPS and material risks, the possible financial consequences thereof and the impact on pension entitlements and rights. An integral part of ALM is an assessment of participants' risk tolerance; we conducted that study in 2022."

Surprising results

Eveline"And that survey showed quite unexpected results. Asked about their preferences for a neutral, offensive or defensive Life Cycle, it turns out that a substantial group of participants would prefer to invest more offensively than they are currently doing. This does vary by age: as a participant's age increases, his or her willingness to take risk decreases."

"Our strategic investment policy is aimed at generating optimal investment results within acceptable risks"

Martin: "In 2023, we will continue with the second phase of this ALM study, where we will review our strategic investment policy - which aims to generate optimal investment returns within acceptable risks. It now seems that we do not need to substantially adjust the construction of the three Life Cycle portfolios."

“As a participant's age increases, his or her willingness to take risks decreases”

Eveline Smeets

A lot depends on it for our participants 

Eveline"One of this year's highlights was that we, at the end of 2022, renewed the contract with our partner Achmea Pensioenservices (APS), to whom we have outsourced our pension administration. This is a new, long-term forward contract whereby we have agreed that APS will continue to carry out its pension administration for SNPS, also after 1 January 2025. In the run-up to this extension of our contract, we had in-depth talks with APS, because a lot is at stake for our participants: not only pension administration, but also the collection of contributions, payment of pensions and communication with participants. All this has to run like clockwork. We also extended the contract with Achmea Investment Management in 2022; they have been handling asset management for us since the very start of the fund."

Martin: "APS will transfer us to a new administration platform through their Accelerate project. Once that is up and running, we expect to be able to take significant steps in terms of further digitalisation and optimal cyber security. We will then hopefully, for example, be able to unlock real-time information for the participant, such as an up-to-date value of your investment pot. I think there will definitely be a need for that in a pension scheme like that of SNPS. Speaking on the subject of information, I have noticed that the topic of pensions has clearly become more of interest among stakeholders in recent years. We also did a lot in 2022 to keep all stakeholders - such as the Accountability Body (AB), our Supervisory Board and former Shell employees - well informed about the various aspects of the new pension law." Through webinars, videos, newsletters, ask-me-anything sessions and a variety of presentations, amongst others. You have also given quite a few lectures on this topic, across the country."

Eveline"Yes, and with pleasure. Not only for our participants, but also for other pension funds. Who, given the pension decisions they will soon face themselves, are of course interested to know what our experiences are with the flexible contract."

Martin""Given your extensive, strategic knowledge of pensions and the new pension system, we were delighted that you joined the SNPS board in 2022. So how did you like it?"

"My appointment also contributes to the diversity we strive for"

Eveline: "It's really great! I feel I can effectively contribute to the further professionalisation of (the executive board of) SNPS, also given my background in actuarial and asset management. In addition, I enjoy sitting on the 'other' side of the table for once. Until now, I mainly served as an advisor for several pension funds. It really adds something to be now able to contribute to the decision-making process. And my appointment also contributes to the diversity we aim for."

Martin: "True, diversity only benefits decision-making. That is why we are taking steps to ensure that we also have good and diverse future candidates for the AB or board, for example, when a vacancy arises; that is why in 2022 we launched 'TOPS', which stands for Talent Development Pension Funds Shell. A learning and orientation programme for interested Shell employees and former employees, who might eventually want to join the AB or the board of one of our pension funds."

Eveline Smeets

After studying Econometrics in Groningen, Eveline Smeets started her career at consulting firm Towers Perrin, later Towers Watson. In 2016, she moved to Shell, where she has been Head of Actuarial Affairs at Shell Pensioenbureau Nederland since 2016. She joined the SNPS board in 2022.

Martin ten Brink   

For Martin ten Brink, 2022 is already his third year as SNPS chairman. Before that, he worked across the globe for over thirty years in a variety of finance positions within Shell. Shortly after his own retirement, in May 2020, he became chairman of both the SNPS and SSPF board.