STIP is a financial institution. Like all financial institutions, it prepares a balance sheet each year, which is published in the annual report. However, it is also essential to know where STIP stands during the year. An important indicator in this regard is the funding ratio.
What is the funding ratio?
The funding ratio is calculated by dividing the capital by the liabilities. The capital is the value of all STIP's assets (investments, etc.). The liabilities are the combined values of all pensions that are paid now and in the future. The black line in the graph represents the funding ratio.
Statutory funding ratio requirements
The amount of the funding ratio is an important indicator of STIP's financial position. The law lays down requirements in this regard. Briefly put, the funding ratio must be high enough to ensure that STIP can withstand any financial shocks, such as a sharp decrease in interest rates or if the stock market tumbles. We call this the required funding ratio. The required funding ratio differs for each pension fund. The average age of the participants is important, as is the investment policy and its associated risks. The green line in the graph represents the required funding ratio.
Policy funding ratio
STIP must take the average funding ratio over the last 12 months into consideration in its policy choices. This is called the policy funding ratio. The red line in the graph represents the policy funding ratio.
The course of the funding ratio is represented in the graph below. STIP's actual funding ratio at the end of December was: 123.7% (end of November: 125.2%). The policy funding ratio at the end of December was 121.8%. At the end of November this was 121.2%. These funding ratios are a snapshot in time, based on the interest rate and the share yield on the last day of each month. The funding ratio develops daily. The black line in the graph represents the funding ratio.