The average Dutch pension fund coverage funding ratio increased to 118 per cent in April, Aon Netherlands’ latest Pension Thermometer analysis has shown.

Aon noted that increased interest rates had improved funding ratios, but this was partly offset by reduced returns on equity investments.

Due to the interest rate increase, the value of liabilities fell by around 4 per cent, while assets declined by 2.6 per cent.

Pension funds’ average policy funding ratio, based on the average coverage funding ratio of the previous 12 months, remained stable at 118 per cent in April.

The consultancy stated that adjusted expectations on the timing and speed of interest rate cuts had a negative impact on equity markets, with developed market equities falling by 2.5 per cent during the month.

However, emerging market equity investments increased by 1.5 per cent as China showed “slightly higher than expected growth” in the first quarter of 2024.

Dutch pension funds’ average fixed income portfolio fell by 3.5 per cent due to the accrued interest.

Riskier bonds that are less sensitive to interest rate movements fell less sharply, with corporate bonds and high yield bonds falling by 0.8 per cent, while emerging markets hard currency declined by 2 per cent.

The portfolio’s total return fell by 2.6 per cent during the month.

On switching to the new pension system, Aon noted that half of schemes that wanted to switch to the new system on 1 January 2025 will not make that date and will switch at a later time, and said that it expected the intended date of transition will be delayed across the sector as implementers have a difficult time setting up the systems.

Furthermore, workplace schemes are still working on transition plans, and pension funds must take into account the right to be heard by pensioner associations.

Once the will of social partners is clear and funds accept their proposals, the process will continue with the accountability body and supervisory board.

“The process must be completed carefully,” said Aon Netherlands director wealth solutions, Frank Driessen.

“We see that tension is increasing on some tables. Try to keep talking to each other and be open to different views. In the end you have to work it out together.”

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