The average funding ratio of Dutch defined benefit (DB) pension schemes rose to 128 per cent in August, data from Aon Netherlands has revealed.

According to Aon, a sharp rise in interest rates for August, despite poor equity results, translated into a rising funding ratio. Furthermore, Aon’s Pension Thermometer found that the policy funding ratio, based on the average funding ratio of the past 12 months, rose to 117 per cent in August.

High inflation and rising interest rates pushed down the return of global equities by 2.5 per cent. Developed market equities fell about 3 per cent, but emerging market equities rose about 2 per cent. Real estate stocks fell about 5 per cent due to the sharp rise in interest rates, Aon said.

The rise in interest rates and an increase in credit risk led to negative yields this month, especially on corporate bonds (-4.2 per cent) and high yield (-1.4 per cent). Long-term interest rates rose, causing the entire fixed income portfolio to fall by around 11 per cent. Overall, investments decreased by about 6 per cent.

Regarding interest rates, after a dip in July, interest rates continued to rise in August. Over the first 40 years, the yield curve rose by about 64 basis points. Due to the higher interest rates, liabilities decreased by 10 per cent on balance.

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