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Sunday 16 December 2018


Spring Conference

Slight decrease in coverage ratio for Dutch schemes

Written by Tineke de Vries

The average coverage ratio of the Dutch pension funds fell from 111% to 110% in February, according to Aon’s Pensions Thermometer.

The policy coverage ratio, which is used to determine pension discounts and indexation, remained stable at 107%. The Ultimate Forward Rate (UFR), which pension funds use to calculate their future liabilities, decreased from 2.6% to 2.5%. On average, the liabilities fell by around 0.3%.

Pension funds’ assets dropped at the beginning of February. Fear for overvaluation led to a sharp decrease in share prices at the beginning of the month. At the end of the month share prices had mostly recovered.

Due to the interest rate increase the value of the fixed income portfolio fell by 0.2%. Developed market equities recorded a loss of 2.1%. Emerging markets had a negative result of 2.6%. Real estate also decreased in value. On average, the assets of pension funds fell by 1.1%.

The interest rate rose slightly last month, on average at around 2 basis points. This means pension funds have a few buffers again. However, the recovery remains fragile, as was evidenced by the equity crash at the beginning of the month. Despite the increase in interest
rates in the last few months, it is expected that interest rates will remain low for the near future.

“February’s figures show a small increase in the interest rate again,” Aon Hewitt chief executive Frank Driessen said. “Nonetheless, the interest rate is still at historic lows. This seems to continue to be the case for the next few years. Pension funds will have to keep this in mind.”

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