The average funding ratio of Dutch pension funds increased to 115 per cent in 2021, after starting the year at 100 per cent, according to Aon.

Its Pensions Thermometer revealed that December provided a final boost to the funding ratio, rising from 111 per cent to 115 per cent in one month caused by a sharp rise in interest rates.

In addition, the policy funding ratio, based on the average funding ratio over the past 12 months, rose from 94 per cent to 108 per cent. Aon said that due to this increase, pension reductions are not expected for almost all funds, and increases are now coming into view.

Aon said 2021 was a good investment year with stocks performing well. It was another year completely dominated by the pandemic, with vaccines causing a gradual reopening of the economy. Demand for products became so great that the production capacity scaled down during the lockdowns had too little time to meet this demand.

This caused shortages of various products and resulted in substantial price increases in several markets, fuelling inflation to unprecedented levels, as well as speculation about possible policy responses from central banks.

Strong economic growth and inflation influenced interest rate expectations. The 30-year swap rate quickly rose from 0 per cent to above 0.5 per cent in the first half of the year, only to fall back considerably during the summer due to the arrival of the delta variant of the coronavirus. Subsequently, interest rates rose again to almost 0.5 per cent at the end of the year with inflation expectations rising.

Share Story: