PHILIPSBURG:--- On October 22 at 3.30 pm, APS will host a webinar about the measures taken in 2021 to keep the pension fund future-ready. These measures included the decrease of the actuarial interest rate, the adjustment of the mortality table, and the lowering of the accrual percentage for participants. Persons interested in attending the webinar can sign up via bit.ly/webinar-APS.
Actuarial interest rate
Every three to five years or so, a pension fund needs a full scan of its current financial position and its future readiness. This is called an Asset Liability Management (ALM) study. Such a scan was performed by Ortec Finance in 2020. One of the conclusions, in light of the persistently low interest rates worldwide, is for APS to lower its actuarial interest rate from 3.75% to 3.5%. This rate is used by APS to determine how much money we need to set aside now to be able to pay out your pension in the future. The calculation is based on the local and international market interest rates, which since the pandemic have seen significant drops. The lower the actuarial interest rate, the more money the pension fund must keep in reserve to remain future-ready.
No change in participant premium contribution
Another significant change is that people generally live longer than before. For APS however, it also means the fund has to reserve more money aside for participants’ future retirement years. APS was therefore required to update the mortality table, the basis for the calculation of participants’ life expectancy. Both the lowering of the actuarial interest rate and the update of the mortality table could have had an impact on the required premium percentage contribution of participants. However, no change in the premium percentages will be necessary at this time. The employees’ contribution remains 8% of the salary-minus-AOV franchise and the employers contribute the difference up to 18% of the gross salary.
Accrual percentage for participants
Even though APS realized successful returns on investment, executed an effective pension reform in 2020, and maintained a coverage ratio of 101.93% by the end of December 2020, in the present situation it is required by law that participants’ accrual percentages are lowered. The accrual percentage is the speed at which participants build up pension entitlements. This percentage has been lowered from 2% to 1.75% per year as of January 1, 2021. This means that the maximum pension is built up in 40 years instead of 35, which is in line with the global trend of pension age increase. Put in a regional perspective, the measure follows the Dutch Caribbean trend. The national pension funds of Aruba and Curaçao adopted the 1.75% accrual percentage in respectively 2015 and 2013 already, and the BES islands have an accrual percentage of 1.71%.
“The measures APS took ensure that the fund remains future-ready in spite of the Covid-pandemic related challenges in the local and global economies. I am happy to announce that our participants’ pension remains secure”, commented APS Director Nadya Croes-van Putten.
