The indicative average funding ratio of Dutch pension funds rose to 119 per cent in January, according to Aon Netherlands’ Pension Thermometer.

Aon said that equity returns and a rise in interest rates boosted the funding ratio. In addition, the policy funding ratio, which is the average of the funding ratio over 12 months, also increased to 118 per cent.

However, Aon warned that tariff measures implemented by US President Donald Trump, who has just been sworn into office, will lead to higher inflation. In addition, headline inflation in the eurozone had risen slightly to 2.4 per cent in December, yet the European Central Bank (ECB) cut the policy rate by 0.25 per cent to 2.75 per cent.

Globally, developed market equities rose by 3.2 per cent over January, which was mainly due to the good results of European equities. European equities rose by more than 6 per cent, while US equities did not go beyond about 2.5 per cent. Emerging markets rose 1.4 per cent in January.

Regarding interest rates, the risk-free interest rate rose by an average of 7 basis points over the first forty years in one month.

The Ultimate Forward Rate (UFR), which pension funds use to calculate the value of their future liabilities, came in at 1.1 per cent. Due to the rise in interest rates, the value of the liabilities decreased by about 1.5 per cent.

Therefore, due to the increase in assets in January by approximately 1.5 per cent, there was a net increase in the funding ratio of more than 3 per cent.

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