Dutch pension funds report falls in funding ratios amid indexation

Several Dutch pension funds have reported declines in their funding ratios during the fourth quarter of 2022 due to pension increases through indexation.

PMT’s current funding ratio fell from 109.4 per cent to 106.8 per cent in Q4, primarily due to the indexation of 4.2 per cent as of 1 January 2023 and the processing of new life expectancy figures.

In contrast to the previous three quarters, PMT’s return on its investment portfolio in Q4 was positive, at 0.4 per cent.

In Q4, PMT’s policy funding ratio, which is the average of the previous 12 months’ current funding ratios, rose from 107.2 per cent to 108.1 per cent.

The pension fund’s assets increased by around €0.9bn during Q4 to €75.4bn, while its liabilities rose by approximately €2.5bn to €70.6bn.

Its investment return for 2022 as a whole was -27.5 per cent.

“We are not afraid of a less financial year, because we are looking at long-term investments and obligations, whereby achieving an average excess return of 1.5 per cent is our objective,” said PMT employer chairman, Terry Troost.

“We have achieved that over the past five years. The negative return on the matching portfolio is the result of the rise in interest rates. This increase in interest means that you need less money to purchase a pension.”

Meanwhile, Dutch pension fund BPF Bouw reported a fall in its current funding ratio in Q4 from 140.9 per cent to 122 per cent.

It attributed the decline primarily to its 14.5 per cent increase in pensions, but also to the negative returns on its investments.

The fund’s policy funding ratio decreased from 131.9 per cent to 131.5 per cent over the same period.

BPF Bouw’s investments returned -2.1 per cent in the fourth quarter of 2022.

Dutch pension fund Provisum saw its policy funding ratio fall from 158.8 per cent in October 2022 to 151.1 per cent at the end of December 2022.

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