The indicative average Dutch coverage ratio fell to 116 per cent in October, analysis from Aon Netherlands has revealed.

Its monthly Pension Thermometer showed that the average funding ratio declined by 2 percentage points during the month 118 per cent in September 2024.

Aon noted that this decrease was caused by negative returns combined with the consequences of a fall in interest rates.

Furthermore, the indicative policy funding ratio, based on the average funding ratio over the past 12 months, fell to 117 per cent in October, down one percentage point from 118 per cent in September.

As a result of the fall in interest rates, the value of the liabilities increased by approximately 1.7 per cent while the portfolio's total return this month was -0.5 per cent. As a result of the slight decrease in assets and the increased liabilities in October, the indicative funding ratio fell by approximately 2 percentage points, on balance.

Initially, stock prices rose 3 per cent in October due to central bank actions and good US labour market data, but at the end of the month, the decline set in and developed market equities returned -0.1 per cent.

Although China's central banks' stimulus packages drove positive returns on Chinese equities the return on emerging market equities remained negative, with a return of -1.8 per cent.

In addition, interest rates rose on the short side of the yield curve while long-term maturities remained flat. As a result, the fixed-income portfolio fell 0.5 per cent.

The riskier bonds did not perform much better – corporate bonds (-0.3 per cent), high yield (-0.2 per cent) and emerging market debt actually fell by over 2 per cent and struggled due to the strong US dollar and rising long-term US interest rates.

On balance, risk-free interest rates fell by an average of 9 basis points in one month. The fall in interest rates increased the value of liabilities by about 1.7 per cent. However, overall portfolio return this month was -0.5 per cent.

Due to the slight fall in assets and increased liabilities in October, the indicative coverage ratio fell about 2 per cent on balance.

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