The average Dutch funding ratio fell to 121 per cent over October, according to Aon Netherlands.

Aon said this was due to stabilisation of interest rates combined with a weaker performance on the equity market. In addition, the policy funding ratio, which is based on the average funding ratio over the past 12 months, also fell to 119 per cent in October.

Aon noted that although the funding ratio has fallen this month, the funding position of Dutch funds is still in a “much rosier” than in recent years. However, this does not mean that pensioners can expect indexation at the start of January 2024. This is due to two reasons, firstly that the price level has fallen to such an extent that it is now officially deflation.

Secondly, although funds have room in the funding ratio, the measure (development of price inflation) will usually not lead to indexation. However, the General Administrative Order (AMvB), which has been extended for another year, offers an opportunity to do something. Under certain conditions, AMvB makes it possible to repair some of the missed indexation as of 1 January 2023. However, Aon said it is questionable whether many funds make use of this.

Another important aspect is that the transition to the new system is getting closer and closer. "We see that, despite the promise of the new system, funds still have to form a relatively large buffer,” Aon Netherlands Wealth Solutions CEO, Frank Driessen, said.

In addition to the mandatory minimum required capital, there must be an operational reserve, a cost reserve, possibly a solidarity or risk-sharing reserve and often also a compensation deposit. If you add all that up, it could easily be 10-12 per cent of buffers. Funds are also very cautious in the run-up to the new system, Driessen said.

"It is difficult to explain that indexation is carried out first and then the funding ratio falls below the required entry coverage ratio due to economic circumstances," he explained.

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