An insight into Pensioenfonds Zorg en Welzijn

An insight into Pensioenfonds Zorg en Welzijn

Profile This is Pensioenfonds Zorg en Welzijn Pensioenfonds Zorg en Welzijn (PFZW) provides a compulsory collective pension scheme for the care and welfare sector. The aim is to provide participants with a high-quality pension package at the lowest possible price. The basic principle of the scheme is solidarity. Participants and employers can accumulate a supplementary pension by means of the Extra Pension product in the collective pension scheme. PFZW invests the contributions paid by employers and employees with the aim of achieving a high, stable and responsible return over the long term at an acceptable level of risk. The fund invests globally in fixed-income securities, equities and alternative investment asset classes, of both a liquid and illiquid nature, and commodities. PFZW is organised as a foundation (stichting). The Board of Governors of the foundation is responsible for the policy and implementation of the collective pension scheme. It comprises six representatives of employer organisations in the sector, six representatives of employee organisations in the sector and an independent chairman. The Pension Council, consisting of participants, pensioners and employers, is an important part of our organisation. In order to implement the principles of good pension fund governance, it has been decided to integrate co-determination and the accountability function into the Pension Council. 2

Organisation Pensioenfonds Zorg en Welzijn was established by the employers and employees organisations in the care and welfare sector. The structure of the pension fund is as follows: Employer s organisations Employees organisations Appeals Committee General Affairs Committee Internal Supervision Committee Pension Council Audit Committee Board of Governors Pensions Committee Investments Committee Executive Office 3

Five-year review 2011 2010 2009 2008 2007 Employers and participants (numbers) Affiliated employers 21,200 20,600 19,900 19,300 19,400 Contributing participants 1,245,800 1,229,500 1,181,500 1,145,100 1,126,700 Former participants 841,500 805,600 773,500 737,200 704,200 Pensioners 324,500 310,300 295,300 277,300 260,200 (Former) participants 2,411,800 2,345,400 2,250,300 2,159,600 2,091,100 Contribution rates Old-age pension 23.4% 23.1% 22.5% 22.5% 22.5% (% of salary less state old-age pension threshold) Invalidity pension 0.4% 0.5% 0.5% 0.8% 0.8% (% of salary less state invalidity pension threshold) Income and expenditure (in millions) Contributions 4,915 4,696 4,315 4,086 3,947 Pension benefit payments -2,551-2,489-2,400-2,251-2,072 Pension administration costs -122-120 -115-105 -91 Financial position (in millions) Investments 110,688 99,508 86,075 71,334 88,195 Foundation capital and reserves -3,845 4,201 6,458-6,660 28,509 Provision for pension liabilities 115,451 96,216 80,174 78,658 59,937 Cover ratio (claims enforceable by law) (as at year end) 97% 104% 108% 92% 148% Wage growth in the sector 1.43% 1.56% 2.85% 3.67% 1.82% Price inflation 1) 2.3% 1.3% 1.2% 2.5% 1.6% Indexation rate 2) 0% 0% 0.72% 0% 1.82% Investments Investment results 3) (in millions) 8,498 10,971 12,802-18,168 5,770 Asset management costs 4) (in millions) -69-73 -142-213 -197 Total return 8.4% 12.6% 17.6% -20.5% 7.1% 10-year return 6.4% 4.9% 4.0% 4.4% 8.4% Average return since 1971 5) 8.2% 8.2% 8.0% 7.9% 9.2% 1) Source: Statline (CBS) 2) Percentage of indexation granted on the basis of wage growth in the sector. 3) The asset management costs have already been deducted from the investment results. 4) The decrease from 2009 is due to a shift from direct investments to investments in funds. 5) This percentage shows the average annual return achieved from the launch date (1971) to the end of the financial year. 4

Consolidated balance sheet as at 31 December 2011 (after profit appropriation) (amounts in millions of euros) 2011 2010 Assets Investments Real estate and infrastructure 15,882 15,394 Equities 40,252 37,058 Fixed-income securities 50,162 34,301 Derivatives 17,713 6,344 Other investments 5,993 9,012 130,002 102,109 Reinsurance part of technical provisions 170 177 Participating interests 160 160 Receivables and prepayments and accrued income 930 4,900 Cash 185 178 Total assets 131,447 107,524 Liabilities Foundation capital and reserves -3,845 4,201 Technical provisions Provision for pension liabilities at pension fund s risk 114,492 95,288 Other technical provisions 868 839 115,360 96,127 Provision for pension liabilities at participants risk 91 89 Derivatives 8,327 3,664 Other liabilities and accruals and deferred income 11,514 3,443 Total liabilities 131,447 107,524 5

Consolidated statement of income and expenditure for 2011 (amounts in millions of euros) 2011 2010 Income Contributions (from employers and employees) 4,915 4,696 Investment income 8,498 10,971 Other income 34 17 Total income 13,447 15,684 Expenditure Pension benefit payments -2,551-2,489 Pension administration costs -122-120 Changes in liabilities due to: Pension accrual -3,943-3,250 Indexation - - Interest added -1,252-1,033 Made available for pensions and pension administration costs 2,486 2,420 Change in market interest rate -15,881-8,843 Change from transfer of rights -439-696 Change in actuarial assumptions for pension scheme -32-5,860 Other movements -143 1,230-19,204-16,032 Movements in other technical provisions -29-5 Movement in provision for pension liabilities at participants risk -2-5 Movement in Reinsurance part of technical provisions -7-2 Net transfers of rights 422 712 Total expenditure -21,493-17,941 Balance of income and expenditure -8,046-2,257 6

Investment policy The investment policy of PFZW is focused on the long term. The policy is consistent with the pension fund s objectives and obligations, which are to provide a good and affordable pension. That primarily means it seeks to generate a high inflationadjusted return over the longer term. PFZW is a relatively young pension fund. Over the next decade pension contributions are expected to exceed pension benefit payments. The pension fund can therefore afford to take this into account in its asset allocation. The objectives and long investment horizon lead to an investment mix with holdings in investment categories other than fixed income securities. The 2011 investment plan had 65% of assets allocated to investment categories such as listed equities, private equity, private real estate and infrastructure. The fixed-income allocation in the 2011 investment plan was 28%. This comprised both ordinary government bonds and inflation-linked bonds, as well as interest rate and inflation derivatives. Finally, the allocation to commodities was 7%. The key points of the investment policy are as follows: Diversification of assets across various investment categories PFZW is a long-term investor with a large volume of assets under management. That means the pension fund is able to invest in investment categories that are not accessible to all institutional investors. By making use of this increased choice, PFZW has over the past few years been particularly successful in limiting the effects of sharp falls, notably in the equity markets. Better coverage of investment categories Within the various investment categories PFZW analyses which investments fit in best with its portfolio and investment policy. Taking market conditions into account While investing, market conditions are taken into account if they differ materially from the forecasts on which the policy is based. Risk management Risk management means that risks are clearly identified and are then controlled as effectively as possible at every step of the investment process. Transparency Annually in April PFZW publishes a list of all investments held on 31 December of the previous year in order to give a clear account of its activities and policy. From the second quarter of 2012 PFZW will also publish a list of all its investments as at the end of 2011 together with the mandates given to external asset managers on its website. This website also lists the companies that have been excluded on the basis of responsible investment criteria. Furthermore, the pension fund publishes figures and results on a quarterly basis. Responsible investment PFZW is responsible for the proper financial implementation of the pension scheme. At the same time, it also has a social responsibility. As a result, responsible investment has been an important principle in determining the investment policy for many years. The aim is to achieve both a good and a responsible return. For the pension fund, responsible investment means consciously taking the impact of environmental and social factors and good corporate governance into account during all its investment activities. 7

12-4862 mei 2012 Pensioenfonds Zorg en Welzijn Utrechtseweg 91, Zeist Postbus 4004, 3700 KA Zeist www.pfzw.nl