The indicative average coverage ratio of Dutch pension funds fell slightly to 118 per cent in September, the latest analysis from Aon Netherlands has revealed.

Its monthly Pension Thermometer showed that the average funding ratio declined by 2 percentage points during the month from 120 per cent in August.

Aon noted that good returns had partially compensated for the effects of the fall in interest rates, keeping the coverage ratio relatively stable.

Furthermore, the average policy funding ratio, which is the 12-month average of the funding ratio, remained at 118 per cent during the month.

Due to the fall in interest rates, the value of liabilities increased by almost 2 per cent in September.

However, this reduction in interest rates also resulted in the fixed-income portfolio rising by around 2 per cent.

Developed market equities achieved a positive return of 1.2 per cent, while emerging markets returned 5.8 per cent.

Real estate investments also performed well with a return of 3.1 per cent during the month, with the total return of the portfolio at 1.9 per cent.

Regarding interest rates, Aon said that, on balance, the risk-free interest rate fell by an average of 15 basis points over the first 40 years in the space of a month.

Meanwhile, Aon noted that there was a lot of work to be done for the transition to the new pension system.

Of the schemes who wanted to switch to the new system on 1 January 2025, only four remain, with Aon stating that it was clear there was a lot of time was needed for a careful transition.

“We see that the entire sector is under pressure and a lot is being asked of the directors, advisers and implementers,” commented Aon director wealth solutions, Frank Driessen.

“We agree with the government commissioner’s idea to also give funds that will later transfer to the new system more time. This takes the peak out of the workload and gives sufficient time for careful file building.”

---