The indicative average Dutch coverage ratio remained stable at 116 per cent in November, analysis from Aon Netherlands has revealed.

This meant that the indicative policy coverage ratio, which is based on the average coverage ratio of the past twelve months, fell to 117 per cent in October.

According to Aon, equity returns, combined with increased interest rate hedging, were able to absorb the increased liabilities due to the lower interest rate, with the risk-free interest rate falling by an average of 25 basis points.

Indeed, Aon explained that while this increased the value of pension liabilities by around 5 per cent, the total return of the portfolio was also approximately 5 per cent, meaning that the coverage ratio remained stable.

More broadly, Aon noted that the US presidential elections dominated the financial markets in November, suggesting that Trump's victory was received with a "sluggish reception" on the stock exchange in the rest of the world.

The analysis also provided an update on how Dutch pension funds are dealing with the transition required under the new Future Pensions Act (Wtp), revealing that, depsite complexity, calculations and questions regarding the entry file, three funds have succeeded in meeting the transition date of 1 January 2025.

These are occupational pension fund Loodsen, PWRI and the APG pension fund.

"We are proud that the pension sector has succeeded in meeting the entry date of 1 January 2025 with these three frontrunners and we hope that this will give confidence to other funds that are busy with the Wtp file", said Aon Netherlands wealth solutions director, Frank Driessen.

Alongside this, however, Aon confirmed that the first lawsuit in relation to the transition has also been announced, in relation to the communication period.

"When choosing whether or not to enter, far-reaching legal requirements apply to actively involve the representatives of participants, former participants and pensioners and include them in the decision-making process," Driessen added.

Aon also provided an update on expecations for indexation in January 2025, revealing that, as things stand now, pensioners cannot expect much indexation for the time being.

Whilst it acknowledged that the transition Financial Assessment Framework (FTK) offers more possibilities, it warned that few funds have made use of them so far.

Driessen stated: "We see that directors are cautious about the new system. Funds do not want to spend money now, which may be urgently needed later to meet all transition goals.

"The reputational risk is particularly high at the transition moment. You do not want to have to communicate a reduction at that moment. That is why directors think twice before they want to spend extra money on, for example, indexation."

---