The average Dutch pension funding ratio has stabilised at 109 per cent, according to Aon Netherlands.

Its latest Pension Thermometer data shows that in May, the policy funding ratio also increased to 100 per cent. This coverage ratio is above the adjusted temporary statutory minimum of 90 per cent.

Aon explained that as this figure is just an average, there will still be pension funds that are below 100 per cent, however, most will not be out of the danger zone.

In regards to interest rates, they fell slightly in May. On balance, the risk-free interest rate over the first 40 years fell by an average of four basis points in one month. However, the Ultimate Forward Rate (UFR), with which pension funds calculate the value of their future liabilities, fell due to the phased transition to the new system. Due to the fall in interest rates, the value of the liabilities increased by approximately 0.8 per cent.

In addition, May was a mixed month for stock markets as the prospects for the economic recovery have improved due to the global vaccine rollout to protect against COVID-19. Financial markets initially reacted positively, but data on consumer prices in the United States fueled higher inflation expectations.

As a result, stocks of IT companies came under pressure and US consumer prices rose at the fastest pace since 2008. The US’ consumer price index rose 4.2 per cent from a year ago. This raised concerns among investors that the US central bank (Fed) may exit its accommodative monetary policy earlier than expected.

In the end, the financial markets barely moved. Shares of developed and emerging markets were up about 1 per cent. In the fixed-income portfolio, only a small positive return was achieved by high yield and emerging markets debt. The fall in interest rates had a slightly positive effect on long-term government bonds and interest rate swaps, causing the fixed-income portfolio to increase slightly. This also applies to the total portfolio, which achieved a slightly positive return.

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