The indicative average funding ratio of Dutch pension funds increased from 122 per cent to 124 per cent in June, due to equity returns combined with a rise in interest rates, Aon's pension thermometer has revealed.

The indicative policy funding ratio, based on the average funding ratio over the past 12 months, remained stable at 118 per cent in June, the same figure as in May.

In June, the risk-free interest rate increased by an average of 15 basis points over the first 40 years.

Meanwhile, the Ultimate Forward Rate, which pension funds use to calculate the value of their future liabilities, was 2.4 per cent.

The value of the liabilities decreased by approximately 2.9 per cent due to the rise in interest rates.

Assets increased in June by about 0.8 per cent, resulting in the funding ratio rising by around 4.5 percentage points.

Aon said that the global financial markets were impacted by several important developments in the past month, including the US doubling tariffs on steel and aluminium imports to 50 per cent, affecting major exporters such as Canada and Mexico, while the United Kingdom obtained a temporary exemption.

The US dollar also weakened by 3.6 per cent against the euro, while a developed market equity portfolio that hedged half of the dollar risk rose by 2.2 per cent and emerging market equities rose by 2.5 per cent.

In the eurozone, capital market interest rates rose slightly, which caused the fixed-income portfolio to decline by 0.8 per cent.

However, some higher quality but riskier bonds delivered positive returns, with credits up 0.3 per cent.

The lower quality returns, such as high yield and emerging market debt, performed better, rising by around 1.5 per cent and 2 per cent respectively, in line with equities due to the reduced spread risk. Overall, the portfolio returned 0.8 per cent.

June also saw the European Central Bank continue its rate cut, cutting the deposit rate to 2 per cent as inflation remained below target.

Additionally, the European Union announced a package of sanctions against Russia, including bans on Nord Stream pipeline transactions and further restrictions on imports and exports.

Meanwhile, rising geopolitical tensions in the Middle East led to an 11.7 per cent increase in Brent oil prices, while European gas prices rose following Israeli attacks on Iran.

Amid speculation about Iran's possible closure of the Strait of Hormuz, oil prices rose in the month. Aon said that markets appear to be pricing in a low probability of severe disruptions.

Despite these developments, Aon’s thermometer showed that the stock markets recovered somewhat in June after the “volatile” month of May.

This month also saw Deputy Prime Minister, Eddy van Hijum, submit a proposed decree for consultation that would give pension funds up to a year extra time to adjust their interest rate hedging and investment policy after the transition to a new system (the so-called post-sorting).

This decision, due to take effect before January 1, 2026, will allow funds to review their strategy without the pressure of speculators on the swap market. Funds may only deviate from their policy if this is in the interest of the participants and is necessary for the strategic investment policy.

In response to this, Aon Netherlands director wealth, Frank Driessen, said hedge funds are already anticipating these changes by selling long-term swaps and buying short-term ones.

Aon noted that funds that have not yet adjusted their interest rate hedges are facing a “dilemma” due to the changing interest rate market.

Driessen stated that the best strategy seems to be that pension funds adopt a “phased adjustment of the interest rate hedge to minimize market impact.

He also welcomed the additional time, saying: "It's good that, now that sorting is possible, there is more time for that”.

The research also showed that while pension funds are currently busy preparing transition files and implementing the Future Pensions Act (Wtp), the situation is different for insured schemes.

According to government commissioner, Fieke van der Lecq, the transition to the new pension system of insured schemes is going “too slowly” and nearly 40 per cent plan to switch only on January 1, 2028.

Commenting on this, Driessen said: "We also believe that employers should start working on this in a timely manner.

"The lead time of the transition to the Wtp is often underestimated. It takes a lot of time as this is also the time to recalibrate the employment conditions package in a broader sense.

“By starting on time, you can choose an optimal solution and you are not forced into a certain straitjacket because of approaching deadlines."

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