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Wednesday 17 October 2018

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Autumn Conference

Coverage ratio of Dutch funds rises to 110%

Written by Tineke de Vries
11/05/18

The average coverage ratio of the Dutch pension funds increased from 108 per cent to 110 per cent during April, according to Aon’s Pensions Thermometer.

The policy coverage ratio, the average coverage ratio of the past 12 months that is used to decide on pension cuts and indexation, remained stable at 108 per cent.

After a decrease in March, the interest rate increased by an average of around three basis points in April. The Ultimate Forward Rate (UFR), which pension funds use to calculate their future liabilities, remained stable at 2.5 per cent. Due to the small increase in the interest rate, the value of the liabilities decreased by around 0.5 per cent.

The interest rate increase resulted in a decrease of 0.7 per cent in the fixed
income portfolio. Equities in developed markets returned 3 per cent due to the
good economic figures and the high consumer confidence. Emerging market equities recorded a return of 1.3 per cent. Real estate also increased in value. Pension assets increased on average by around 1 per cent.

“This again proves how unpredictable the coverage ratio is,” Frank Driessen, chief executive officer at Aon Retirement & Investment said. “After a rise earlier this year and a decrease in March, we now see an increase again. The fact that the coverage ratio changes so often is a reflection of uncertain times. Pension funds will need to keep this in mind.”



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