In 2021, Algemeen Pensioenfonds Sint Maarten (APS) lowered its actuarial interest rate, the rate used to calculate the reserves APS needs to pay out pensions now and in the future. We would like to explain to you why this was necessary and what this means for you and your pension.
To address any questions and concerns you may have, we put together a list of frequently asked questions about the measures we took to keep your pension fund reliable, sustainable, and healthy.
What is the actuarial interest rate?
The actuarial interest rate is the interest rate that is used by pension funds to determine the pension benefit obligation: the reserves that are required to pay out pensions now and in the future. The rate is established annually by external and certified actuarial experts, who calculate the rate based on local and international market interest rates.
The actuarial interest rate was lowered. Why?
Local and international market interest rates were substantially negatively affected by the COVID-19 pandemic. Because these interest rates significantly impact the actuarial interest rate, it had to be lowered from 3.75% to 3.5%.
What are the consequences of lowering the actuarial interest rate?
Accruing pension has become more expensive than before. To cover the costs of future pensions, the required premium is more than the actual premium of 18%. Consequently, and as required by the law, the accrual percentage of your pension has been lowered - from 2% to 1.75%. This means that we all accrue a little less pension than before, but we can be assured that pensions can continue to be paid out to everyone - now and in the future.
Accrual percentage: the growth rate of your pension
Will pensions or salaries be cut because of the decreased actuarial interest rate?
No. The measures taken were sufficient to guarantee the stability of the fund. Furthermore, as of July 2021, APS has an estimated coverage ratio of 107%, which means there are enough reserves available to pay out (future) pensions.
Coverage ratio: the reserves required to pay out pensions now and in the future. At a coverage ratio of 100%, a fund has exactly enough to meet all its financial obligations.
More information and questions
You can find this letter and the press release about the lowering of the accrual percentage on apsxm.org and our Facebook page, along with an explainer video. Also, APS will organize a webinar to provide further explanation and address questions publicly and in person. The register link for the webinar will be published to you via your employer, our Facebook page, and on apsxm.org.
Animated video on APS Youtube explaining the consequences of the
actuarial interest rate decrease
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Please know that we value you as a participant. We work dedicatedly to secure your future pension and aim to inform you proactively, transparently, and comprehensively.
