The average coverage ratio of Dutch pension funds increased from 90 per cent to 92 per cent in May, according to the latest analysis by Aon.

Its most recent Pension Thermometer figures, found that the policy coverage ratio, which is based on the average coverage ratio over the past 12 months, fell to 98 per cent. This is under the legalls required minimum of 100 per cent. Under the current rules, this would mean discounts by the end of 2020 in unchanged circumstances

Giving an overview of the economic picture for pension funds, Aon said over the month improved economic prospects pushed interest rates up slightly in May. On balance, interest rates have increased by an average of 5 basis points since last month.

Despite receiving news of the negative effects of the lockdowns on financial results in the first quarter, and warnings of poorer results for the second quarter, investors looked much further ahead to more positive news. This includes the winding down of lockdown measures, and new plans by Germany and France for a €750bn emergency fund to support the economy of Italy and Spain and rising oil prices. As a result, investors continued to buy developed countries' equities, emerging market debt and high yield, which positively affected prices.

In the financial markets, global shares of developed markets rose by more than 3 per cent due to improved prospects. Emerging market shares fell about 1 per cent due to the resurgence of tension between America and China and developments in Hong Kong, where China is trying to strengthen its grip through a security law.

Real estate also lagged behind the recovery with a decline of almost 3 per cent. Sentiment also reduced credit risks and falling spreads, such as high yield, with the spread falling from more than 7 per cent above government bond yields to around 6 per cent.

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