Your pension, your future
Love your future. Shell Pension.

November 2020

SNPS. Smarten up your future
Annual Report 2020 – Shell Nederland Pensioenfonds 

Interview with Arnold Gast, Risk & Investment Officer Shell Pension

“We have stayed the course in an unprecedented challenging year”

While corona plunged the world economy into crisis, stock markets quickly recovered from a historically deep fall. 2020 was a year of extremes. But what did the pandemic mean for SNPS?

Before we go into the stock market year and the investment results, SNPS is already implementing what was agreed in the Pension Agreement. How is that going?

‘The pension scheme that was implemented by SNPS in 2017 is one of the two proposed pension schemes in the Pension Agreement, from which all pension providers in the Netherlands will soon have to choose. SNPS participants have a personal pension account, which they use to invest in so-called Life Cycle profiles. This allows the participants to build up a pension capital, from which they draw a pension benefit when they retire.’

What do those Life Cycle profiles mean?

“These clearly illustrate the investment risks to the participant. For example, if you want a chance to obtain a higher pension and are willing to take a little more risk, you can choose the Life Cycle profile ‘offensive’. In this case, the participant invests 100 per cent in the ‘Yield Portfolio’ (with investments such as shares) in the initial years. If a participant prefers to take a little less risk, then 90 per cent is invested in the Return Portfolio Investments and 10 per cent in safer bonds, and you would choose a neutral profile. Participants can also choose a more defensive profile. Here, 70 per cent is invested in the Yield Portfolio and 30 per cent in safer bonds.” This allows the participant to choose the investment profile that best suits their own situation, pension objective and risk appetite.”

How do you determine your investment profile as a participant?

“You choose a profile that suits your own situation, pension objective and risk preference. A decision-making tool on the personal pension portal guides the participants through this process. It provides insight into the risks and potential returns of the Life Cycles. And we continue to emphasise: a participant in the SNPS scheme has no guarantee of the amount of the final payment on the retirement date.”

Can you continue to invest when you are a pensioner?

“Absolutely. With the Collective Variable Pension (CVP), participants and former participants (people who participated in the SNPS scheme but now no longer build up a pension, ed.) can choose to partly invest their accrued pension capital collectively from the age of 58. And towards retirement, they gradually convert it into an entitlement to a variable benefit. Continuing to invest after retirement can partially protect the long term pension benefits from inflation. SNPS determines the investment portfolio within CVP with great care, balancing the CVP objective with the risks. Within CVP, just like with the Life Cycle investing, all risks - investment, interest and longer life - lie with the participants and pensioners.’

On 15 March 2020, Prime Minister Rutte announced the intelligent lockdown. When did it become clear to SNPS that the corona outbreak was very serious?

“On Friday, 28 February, the stock markets were already experiencing a lot of volatility. Shortly afterwards, we decided to be very responsive and follow the developments in the markets on a weekly basis - which soon became twice a week - in accordance with our crisis management protocol.”

Did you have to perform any major interventions?

“Not at all. Our Life Cycle Profiles were carefully established several years ago. The Life Cycles are designed for participants to invest in riskier asset classes (the Return Portfolio) well before retirement age and invest more in risk-averse assets as they approach retirement age.

The idea behind the Life Cycles is that young participants are able to absorb market shocks because they have a long investment horizon ahead of them; so the investments are chosen for that purpose. Older participants, who are not able to absorb or compensate for major shocks in future years, therefore invest more conservatively, via the Life Cycle system. In addition, the investments are carefully composed to create a well-diversified portfolio.”


“In the crisis situation, we particularly monitored the financial markets and mapped out what measures we could take, if necessary. Surprisingly, thanks to the decisive intervention of central banks, interest rates remained fairly constant, while the stock market experienced the fastest downward correction and then the biggest recovery ever. Preventing the so-called ‘action bias’ (a tendency to rush an intervention) was our motto.”

What adjustments did you make?

“We decided to not intervene and continue to invest our participants’ contributions. This means that in the months of March and April 2020, we made favourably valued purchases. Periodically, the Life Cycle profiles and the Life Cycle portfolios are aligned with the strategically intended weightings. Due to market developments, we have been keeping an extra close eye on them. While the stock markets were plunging, we aligned the equity weighting with the strategic level, with positive results. Otherwise, we intervened relatively little and have mainly held our course. Of course, we are also a long-term investor, with a distant horizon! The volatility of the financial markets is part of the game, although last year was very extreme.”

How did that affect the result for the three Life Cycle profiles?

“By not intervening, but continuing to invest and rebalance, we experienced the recovery of the stock markets. The result is a positive result for both young and older participants in all three Life Cycle profiles.”

“We are taking major
steps forward”

How did that work out for CVP?

“By maintaining the strategy set by the Board, i.e. to mitigate the major risks (such as interest rate risk) and maintaining a balanced portfolio, we achieved a nice result. The outcome was positive at the end of the year, resulting in a small increase in pensions for CVP participants. That is something we are very proud of.”

Yet this crisis must have brought your horizon closer, even for a long-term investor like SNPS.

“Obviously. The first thing you do is ensure that the people and the organisation continue to function. This also enabled us to monitor and assess the situation with a much higher frequency. That worked very well.”

Were you prepared? Was there a crisis scenario ready?

“Yes, we were prepared. SNPS has a crisis plan ready for both financial and non-financial crisis situations. The outbreak of the pandemic prompted us to activate our protocols and increase our dike surveillance. So when the pandemic broke out, the set-up was ready and everyone knew what had to be done. I am relatively new to Shell, but this crisis plan is really very well prepared. The switch to working from home also went smoothly. Our disciplined way of working proved itself.”

What is the impact of the pandemic on the global economy?

“As the old economy is hit harder than the new economy, innovation is likely to further accelerate. Our consumption behaviour, but also the behaviour of stock markets and companies, has changed because we spend all day on the digital highway, instead of on a real highway. Suddenly, IT is more needed than ever. At the same time, people are driving or flying less, and therefore the demand for energy has fallen sharply. The need for large office buildings also seems to be gone. At the same time, the pharmaceutical and technology industries benefit enormously from the crisis. The differences of the impact between certain sectors, but also regions, are therefore huge.”

How does that translate to the financial markets?

“On the stock market, the effect of the pandemic was short-lived. Initially there was a strong negative reaction to the sudden economic stagnation, but then it became one upward trend until the end of the year. Governments proved willing to allow debt to rise and central banks provided sufficient liquidity with their monetary support. And unlike the financial crisis of 2008, there were no endless discussions about interest rate cuts, emergency facilities and support purchases. Everything was there in no time. As a result, few companies went bankrupt. Partly because of this, the financial markets quickly assessed that this was a temporary shock with different long-term consequences.”

Meanwhile, the economy shrinks but stock markets rise. Anything can happen.

“We have seen before that movements on the capital markets don’t always correspond to economic reality. That can also be partly explained. The listed companies don’t include a significant proportion of the SMEs that are being hit very hard. The economic malaise does exist. Globally, only China’s economy has grown.”

Has the crisis changed stock market behaviour?

“Old-fashioned investing, looking for value stocks, seems to be out of favour. On the other hand, shares with high dividends and a somewhat stable price are in huge demand. This also applies to shares that have gone up and gained momentum. In addition, the major technology companies such as Facebook, Amazon and Apple, as well as Alibaba and Tencent, have never been so dominant together. Both on the stock market and in the economy. Car maker Tesla is already worth two thousand times its profits. The question is, what will it be like in 5 to 10 years? We have also seen new investors in the crisis. Never before have consumers opened so many investment accounts. Mostly by a generation without much experience or historical awareness. People buy Apple shares regardless of the high valuation, simply because it’s a great company. We have seen a similar development before in the dot-com bubble, in the early 2000s.”

Meanwhile, various political developments were taking place on the world stage. Which ones did you follow with trepidation?

“Brexit, the EU budget, but of course also the trade conflict between the US and China. That conflict was only intensified by the pandemic. Fortunately, we ended the year with the US elections. They offer hope for a different time. Of course the recent years have had a positive effect on US stock markets, but now it will be interesting to see what happens when you get a more social policy. The gap between rich and poor has never been so wide, and in the US you see where that experiment can lead: great unrest, division and political instability. In the longer term, stability is better for international trade and economic development.”

You have mentioned it before: governments are taking unprecedented measures to combat the corona crisis. What observations can be made here?

“In particular, how it will affect interest rates and inflation. So far, interest rate development has been very controlled and inflation has remained low for years, but the question remains: for how long? We find it particularly difficult to predict interest rates at the moment, and in fact the same applies to inflation. The interest rate is now stable at zero, but it may fall further. Inflation could be more likely if governments continue to compensate for the fall in demand in the market by giving money directly to consumers, and perhaps overshooting.”

What is your view on the 2021 investment year?

“There is much to look forward to. Vaccines have boosted business and consumer confidence. For the time being, we are moderately positive. However, there are concerns about high valuations, inflation and interest rate developments. The key question is what central banks will do when inflation starts to rise. Will they then raise interest rates, or give more room for inflation to rise? With the debts that governments have incurred, you would say that a low interest rate is beneficial. But our financial structure is quite fragile. There are high debts and interest rate increases that many companies and parties wouldn’t be able to bear. The pandemic has made it clear that banks and businesses need larger buffers. In the 2008 financial crisis, banks had too few reserves, now you see that we need more reserves in the supply chains, economies and businesses. That means we will become a little less efficient and may not be able to grow as fast.”

About Arnold Gast

Arnold Gast studied economics at the University of Groningen and obtained his postgraduate Master's degree in Financial Analyses at the Free University of Amsterdam. Gast worked for the larger part of his career at Delta Lloyd in plaats van Delta LoydAsset Management, where he was, among other things, responsible for the Credits & Investment Office. Afterwards, he filled the position of Chief Investment Officer on the board of ACTIAM. Since July 2019, he has been Risk & Investment Officer at Shell Pensioenbureau Nederland B.V.

What is a Life Cycle?
“Participants can choose to invest in an offensive, defensive or neutral Life Cycle profile. A Life Cycle is an investment methodology whereby the investments for each participant are matched to the participant’s stage of life. For example, a participant who chooses a neutral life cycle profile invests 90% of their initial years in the Return portfolio. The fund’s policy is to increase returns in the phase when the participant is still young. As the participant gets older and the retirement date approaches, the investment risks are gradually reduced by investing more in defensive bonds. The aim of Life Cycle investing is to reduce risk towards retirement so that the amount of the pension becomes more predictable and there are fewer surprises for the participant.”

Arnold observes
“The extremely low interest rate makes shares attractive. As an alternative to interest, investors are now seeking shares with a stable dividend.”


If your horizon (retirement date) is still far away, it pays to take relatively more risk. After all, there is more time to absorb a drop in pension capital. In this phase, the main objective is to generate returns. Higher intermediate price volatility is therefore accepted in exchange for the chance of higher returns.

As you approach your horizon (from age 55), there should be progressively less risky investments to protect the participant from the undesirable effects on the level of their pension. After retirement, it still pays to continue investing.

Investing further after retirement helps to partially protect the pension benefit from inflation in the long run. This is done via the Collective Variable Pension (CVP). At the same time, large fluctuations in the variable benefit are undesirable for the pensioner. That is why in this phase, interest rate fluctuations are almost fully hedged.