Dutch pension fund ABP ended 2010 with a coverage ratio of 105.4%, an increase of 11% compared to the third quarter, while the return on investment realised was 13.5% or €28 billion.

The coverage ratio in the fourth quarter increased to 106.8%, but after taking into account the most recent prognosis of the Central Bureau of Statistics regarding Dutch life expectancy, ABP is setting the coverage ratio at the end of 2010 at 105.4%. At this level, ABP meets the strict requirements of the Dutch regulator, De Nederlandsche Bank, meaning ABP does not have to make any reductions in pension rights and payments.

Apart from an increase in the interest rate which ABP has to use for calculating the liabilities, the value of ABP’s assets increased in 2010 as well. The asset valuation at the end of 2010 was €237 billion, while investment returns over the fourth quarter reached €6.3 billion (2.8%).

Due to the increased life expectancy, ABP has had to raise its liabilities by €2.5 billion and correct its coverage ratio by 1.4%. For the second year in row this plays a vital part in decreasing coverage ratios, as increased life expectancy resulted in an upwards correction in ABP’s liabilities by €11 billion and a downwards correction for its coverage ratio of 5.8% in 2009.

In ABP’s recovery plan, a coverage ratio of at least 96% at the end of 2010 was expected. As the actual coverage ratio is much higher, there is no need for pension reductions, although ABP decided in November 2010 that pensions in 2011 would not be increased in line with the salaries paid to government employees and teachers.

ABP (Stichting Pensioenfonds ABP) is the industry-wide pension fund for public sector employees in the Netherlands, with over 2.8 million members.

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