The indicative average coverage ratio of Dutch pension funds remained stable at 118 per cent in March, despite poor equity returns amid a "looming" trade war, Aon Netherlands’ Pension Thermometer has revealed.

The tracker showed that, while equity returns were poor, the sharply rising interest rates and fall in liabilities offset this.

According to Aon, the Ultimate Forward Rate (UFR), which pension funds use to calculate the value of their future liabilities, came to 1.5 per cent.

Due to the interest rate increase, the value of the liabilities decreased by approximately 7 per cent, which offset the 7 per cent decrease in assets in March, meaning that the coverage ratio remained virtually constant.

The indicative policy coverage ratio, based on the average coverage ratio over the past 12 months, also remained the same at 118 per cent in March.

This is despite growing geopolitical tensions over the past month, after President Trump announced various import duties on, among other things, aluminium and steel, cars and Chinese products, with Canada, China and the European Union all taking countermeasures in response.

Trump has also since announced reciprocal import duties, causing stocks to fall further in the last days of the month.

In addition to this, Aon noted that the Fed recently lowered the growth forecast for the American economy to 1.7 per cent this year from a previous estimate of 2.1 per cent.

The uncertainty caused the stock markets to fall sharply, also because the US dollar fell by about 4 per cent against the euro, with developed market stocks falling by almost 7 per cent, while emerging markets were somewhat spared with a decline of 3 per cent.

The rising interest rate caused the fixed income portfolio to fall by around 6 per cent.

Geopolitical tensions are not the only consideration for the Dutch pension industry, as Aon noted that Dutch funds will be busy with the transition to the new pension system, particularly given recent comments from the government commissioner, which suggested that the transition needs to be done faster in order to meet the deadline date.

"All in all, the estimate is that many funds will not make it to 1 January 2026 and will shift somewhat," Aon Netherlands director, Frank Driessen, said.

"Most funds have already increased their interest rate hedging in the run-up to the new system, but we see that, for example, share and currency protection is now also receiving attention.

Aon also noted that more Q&As and webinars are becoming available, sharing information for pension funds

However, Driessen said that "nevertheless, it is a difficult playing field".

“On the one hand, it is good that more information is becoming available, on the other hand, this also makes it difficult. Just when you think you have everything ready, it turns out that an additional scenario needs to be investigated and substantiated," he said.

"For example, the 'balanced transition' step-by-step plan published in March requires that the impact of the premium coverage ratio on the results be explicitly examined.”

Aon also pointed out that it has not yet been formally confirmed that the pension transition will take effect no later than 1 January 2028 instead of 1 January 2027, or that the intended linking of the submission of the implementation plan will be no later than one year before the start.

However, Aon warned that the fact that the bill to postpone these dates is linked to the referendum could prove to be a complication, with hopes that clarity will be provided next week.

“We advocate that this clarity be provided quickly,” said Driessen.

“Despite the fact that there are currently no financial sanctions for submitting the implementation plan too late, many funds do not feel comfortable not meeting the statutory deadlines. It would provide some relief if there was clarity about this.”

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