The average Dutch defined benefit (DB) funding ratio stabilised at 128 per cent in February, according to Aon Netherlands.

The latest analysis from its Pension Thermometer also found that the indicative policy funding ratio, based on the average funding ratio over the past 12 months, rose to 125 per cent in February.

Aon Netherlands said a rise in share prices, combined with the increased interest rate hedge, offset the increase in liabilities.

Providing a macroeconomic update, Aon Netherlands stated that technological and geopolitical developments played an increasingly important role in the markets during February.

For example, the Supreme Court in the United States declared Trump's emergency tariffs illegal. However, through another law, he is introducing new, higher import tariffs, causing uncertainty about repayments, foreign reactions and the economic impact.

On the geopolitical front, Chinese shifts in demand for US government bonds, trade tensions around US tariffs, developments in the Middle East and the progress of negotiations around Ukraine are causing mixed sentiment, Aon Netherlands said.

On the technological front, there was unrest about the huge investment plans of American hyperscalers. Artificial intelligence (AI)-related concerns have also triggered an industry-wide correction among companies deemed vulnerable.

Despite this, February delivered positive results: the equity portfolio rose by 1.2 per cent while emerging market equities returned 6.3 per cent due to high returns in Korea, Taiwan and South Africa.

Meanwhile, interest rates in the eurozone fell mainly on the long side of the curve, causing the fixed-income portfolio to increase by 2.8 per cent. Relatively short-term corporate bonds returned 0.5 per cent. The total return of the portfolio was 3.3 per cent.

In February, the risk-free rate fell by an average of 18 basis points over the first 30 years. For longer maturities, interest rates fell even more.

The Ultimate Forward Rate (UFR), which pension funds use to calculate the value of their future liabilities, came in at 2.3 per cent. Due to the fall in interest rates, the value of the liabilities increased by approximately 3.6 per cent.

For the new defined contribution (DC) funds, returns during the month ranged between 1.9 per cent and 2.38 per cent across all age cohorts.

Indeed, Aon Netherlands’ analysis found that all participants achieved a positive return. However, older particpants that have opted for a fixed benefit achieved a lower return than participants who want to continue investing after retirement.

This is because with a fixed benefit, the risk is reduced as a person nears retirement and therefore less is invested in shares, Aon Netherlands explained.

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