Pensions increased on 1 January 2023
Stichting IKEA Pensioenfonds (STIP) increases the pensions by 5.12% on 1 January 2023. The decision was ratified by the STIP board on December 30, 2022.
Pension benefits of all members will go up by 5.12%
All participants will receive the same increase, regardless of whether their pensions have become payable or not. If you are already retired, you will receive a higher benefit payment from January 2023. This will be paid for the first time in March 2023, including a back-payment for January and February 2023. And if you haven't stopped working yet, the pension you have accrued with STIP until 31 December 2022 will increase, giving you a higher pension when you do retire.
Why are we increasing pensions by 5.12%?
We can do this thanks to STIP's strong financial position. But also the fact that we are planning to switch to the new pension system allows us to make use of more flexible rules.
An important tool for determining our financial position is the so-called funding ratio. The funding ratio is the ratio between the money a pension fund has available 'in cash' (the pension fund's assets) and the pensions it has to pay out now and in the future (the pension fund's liabilities). After the 5.12% increase in pensions, our funding ratio has been set at 123.7%.
STIP has to look at the average funding ratio over the past 12 months when making its policy decisions. This is called the policy funding ratio. Our policy funding ratio is set at 121.8% after the 5.12% increase in pensions. This means our financial position is still more than strong enough to buffer any setbacks, even after the increase.
Your pension is increased each year by a maximum of the CAO (collective labour agreement) wage increase from October to October. But only if all the rules are met. Is our financial situation solid enough? Then we examine the possibilities to increase your pension. The board decides on this every year. Price inflation in October last year amounted to 16.93%. Because prices rose so extremely, the board looked very carefully at pension increases in 2022. We also discussed the options with IKEA's social partners and STIP's accountability council.
Temporary leniency for higher pensions
As of 1 July 2022, pension funds are permitted to increase pensions if their policy funding ratio is 105% or higher (this is normally 110%). It is a temporary rule by the Dutch government, a decision that is already looking ahead towards the new pension system. It is not yet clear when IKEA will switch to the new pension system. We are discussing this with IKEA in a joint project.
The social partners of IKEA declared to STIP in December 2022 that, as part of the transition to the new defined contribution-based pension system, they are making plans to transfer all accrued pension entitlements and pension rights to a new pension contract. This statement was a requirement for the STIP board to make use of the more lenient rules.
Utilising these more flexible rules has given us the room needed to grant a full supplement of 3.5% (the CAO negotiated wages increased by 3.5% from October 2021 to October 2022), as well as restoring last year's supplement in full. This amounts to a 1.62% increase on top of last year's pension supplement of 0.18% (IKEA's collective wage increase in the period October 2020 - October 2021 was 1.8%). We then add the 3.5% and the 1.62% together to arrive at a 5.12% increase starting from 1 January 2023. IKEA's social partners and the accountability council of STIP were notified of our decision on 30 December 2022.
In making this decision, it was essential to carefully weigh up the interests of all participants (active members, deferred members and pension beneficiaries). We looked in particular at the effects that this pension increase will have on each generation. Among the factors we considered is the substantial decrease in purchasing power of members who are retired. Price inflation was very high in 2022 and, in line with the rules, we have for years not or hardly been allowed to increase the pension entitlements. At the same time, we are continuously keeping a close eye on the uncertain economic prospects. The Board considers it important that STIP maintains its strong financial position after the pension increase in the run-up to the new pension system.
Further pension increases not guaranteed
It is expected that prices will continue to rise significantly in 2023. This is by no means a guarantee that the pensions will increase again next year The Board of STIP assesses annually whether or not indexation is possible. Indexations are not guaranteed. They are conditional upon and dependent upon our financial position and prospects at the time. We therefore cannot make any promises about granting any increases in the future.
A reduction of your pension is not at issue here. Since 1 January 2018, IKEA has a so-called ‘margin call’ obligation. This obligation to make additional payments prevents our pension fund from falling into a financial crisis. Only in the most extreme case that IKEA cannot meet this obligation can there be a chance that your pension is reduced.