Pension & Risk Survey 2022: the results

With the arrival of the new Dutch pension system, the rules for the Forward pension will also change within a few years. Pensions will move more in line with the economy and therefore become - more than is currently the case - dependent on investment results. That is why we conducted the (anonymous*) risk attitude survey last year in the context of 'investing for your pension'. Such a survey is also required by law. Of the over 5,400 Forward members, around 800 completed the questionnaire.

Two aspects of the concept of ‘risk attitude’ were investigated:

  • Risk appetite: to what extent are members willing to take risks when investing for their pension.
  • Risk capacity: to what extent are members able take a risk when investing for their pension.

Risk appetite

For the first component (risk appetite), members could use a slide - on a scale of 0 to 10 - to indicate how much investment risk they preferred. The accompanying graph showed that with a high risk the average expected pension is higher than with a low risk. It also became apparent that with a high risk, the outcome is more uncertain: a very good pension can be achieved, but there is also a chance that the pension will be low. At a low risk, although the outcome is more certain (there are no large peaks), the pension will be lower on average than if more risk is taken.

Main conclusions regarding risk appetite:

  • The risk appetite among Forward members is broadly spread. Most members (16%) put the slide exactly in the middle, at 5. On average, the slide was set at position 5.1.
  • Notable - but not unusual compared to surveys at other funds - is a peak at position 10. Exactly 10% of Forward members opt for maximum risk.
  • Normally in this type of survey there is also a peak at position 0 (minimum risk), but this is not the case with Forward.


And in addition:

  • The older they are, the less risk appetite Forward members have. Working people have therefore on average a greater risk appetite than people who already receive a pension.
  • Men have a greater risk appetite than women.
  • People with a high income have a greater risk appetite than people with a lower income.
  • The better one claims to understand how the slide and chart work together (and therefore 'how investing works'), the greater the risk appetite.

Risk capacity

In the context of risk capacity, we asked whether people (expect to) have other sources of income after retirement besides their pension and the Dutch State Pension (AOW). This includes savings, an annuity, equity in their own home or continuing to work after retirement. This may affect the maximum risk a person can run.

For the above reason, we also asked whether or not people think they could absorb a 20% setback in their pension. To this, pensioners were more likely to say 'no' (23%) than people not yet retired (10%). Current Unilever employees indicated 'I don't know' significantly more often than retirees and former Unilever employees.

Risk appetite versus risk capacity

If we compare the willingness and ability to bear (investment) risk for the pension against each other, then the (perhaps obvious) conclusion is:

The greater the risk capacity (e.g. by having assets, other income or reduction of expenses), the greater the risk appetite.

What happens next?

First of all, Unilever and the unions must reach agreement on a new scheme for Forward. If the board of our pension fund then comes to a positive assessment of its feasibility and balance, we will implement the new scheme. In doing so, we are required (by law) to establish a risk attitude for each age group, which serves as a basis for the investment policy. This survey is used for this, as well as scientific analysis. In addition, each pension fund may also use its own considerations based on characteristics of its members.

In the open field at the end of the survey, we received a lot of positive feedback, but also responses that showed concern or misunderstanding. In the ‘Investing for a good pension’ series we address the various topics that need further explanation.

Do you have concerns or questions that are not addressed in this article nor the ‘Investing for a good pension’ series? Send an email to: pensioen.infolijn@unilever.com.
 

* We have no insight into who of the 5,400 invitees completed the questionnaire. Moreover, we did not receive individual responses from the research agency, but only a report with total outcomes for the entire file and by subgroup (based on gender, age group, income group and member status).