The average funding ratio of Dutch pension funds rose to 120 per cent in August, the latest analysis from Aon Netherlands has revealed.

Its monthly Pension Thermometer found that good returns combined with a limited fall in interest rates led to an increase in the funding ratio. In addition, the average policy funding ratio (12-month average of the funding ratio) for Dutch schemes stabilised at 118 per cent during the month.

During the month, developed market equities returned 1.8 per cent, while emerging markets fell 0.7 per cent. The fixed income portfolio was also up 1.0 per cent.

Furthermore, riskier bonds fell at the beginning of August due to widening spreads but also achieved positive returns: corporate bonds (0.3 per cent), high yield (1.6 per cent) and emerging markets hard currency (2.7 per cent). The portfolio's total return this month was 1.5 per cent.

Regarding interest rates, Aon said that, on balance, the risk-free interest rate fell by an average of three basis points over the first 40 years in the space of a month. As a result of the fall in interest rates, the value of liabilities increased by approximately 0.2 per cent.

In addition, Aon said that, as 1 January 2025 approaches, more schemes are publishing their transition plans to switch over to the new Dutch pension system.

It is now clear that De Nederlandsche Bank (DNB) expects transition plans to include bandwidths for quantitative measures, such as the uniform calculation method (URM) amounts and the net benefit. If the results for the various participant groups fall within the bandwidths, the transition can go ahead.

Most of the transition plans that have been published to date do not include these bandwidths. This means that an addendum to the transition plan still needs to be written. DNB is currently writing to funds to draw the attention of the social partners to this.

---