The average funding ratio of Dutch pension funds increased to 136 per cent in September, up from 135 per cent in August, according to Aon Netherlands.

An increase in interest rates was offset by a decline in assets during the month, while new forecasts for members’ life expectancy resulted in an increase of approximately 1 percentage point.

Aon Netherlands’ Pensions Thermometer also showed that the indicative policy funding ratio, which is based on the average funding ratio over the previous 12 months, rose by 1 percentage points to 130 per cent in September.

During the month, the risk-free interest rate over the first 30 years rose by an average of 23 basis points, while the Ultimate Forward Rate (UFR), used by pension funds to value future liabilities, stood at 2.1 per cent.

Due to the rise in interest rates, the value of the liabilities decreased by approximately 2 per cent.

However, the total return of pension funds’ portfolios was -1.7 per cent, driven by a -3.4 per cent return on fixed income assets, while equities returned 0.2 per cent.

The combination of rising interest rates and falling assets resulted in a funding ratio of 135 per cent, the same level as the previous month.

Despite this, the funding ratio improved due a decline in average life expectancy, which resulted in a funding ratio improvement of 1.2 percentage points.

While scheme members who have not yet transitioned to the new pension system have concerns, Aon Netherlands wealth director, Frank Driessen, said they did not need to worry for the time being.

“Fortunately, it has also become apparent that confidence in the new system has increased,” he continued.

“It is very pleasing that there is a break in the trend and that confidence is increasing. Let us, as a sector, work hard to live up to this confidence.”

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