The indicative average funding ratio of Dutch pension funds rose to 130 per cent in January, according to Aon Netherlands’ Pension Thermometer.

Aon said the increase in share prices was the main cause of the increase.

In addition, the policy funding ratio, based on the average funding ratio over the past 12 months, rose to 124 per cent in January.

In January, the risk-free rate fell by an average of six basis points over the first 30 years, while for longer maturities, interest rates fell further.

Furthermore, the Ultimate Forward Rate (UFR), which pension funds use to calculate the value of their future liabilities, came in at 2.4 per cent. Due to the fall in interest rates, the value of the liabilities increased by about 1.5 per cent.

Providing a market update, Aon said equities had another strong month, but market developments were dominated by trade, tariff and geopolitical tensions.

In particular, Aon said that emerging markets and commodities started strongly, with risky investments holding up well despite “political noise and uncertainty”.

Emerging market stocks and commodities rose 9 per cent in January, while developed market stocks posted returns of 2 per cent.

In the eurozone, interest rates fell, causing the fixed-income portfolio to increase by 2 per cent. For example, corporate bonds achieved a return of 0.8 per cent due to the falling risk premium.

Overall, the total return of the defined benefit (DB) portfolio was 1.9 per cent.
However, for defined contribution (DC) schemes – those schemes that have now switched to the new pension system – returns were lower.

Yields for DC plans were below the level of 1.9 per cent and ranged between 1.4 per cent and 1.8 per cent across all age cohorts.

All participants achieved a positive return, Aon said.

However, older participants who opted for a fixed benefit achieved less return than participants who plan to continue investing after retirement. This is because with a fixed benefit, the risk is reduced more in recent years and therefore less is invested in shares.

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