Dutch pension fund PFZW returned -22.6 per cent on its investments in 2022, down from a positive return of 8.2 per cent in 2021, its annual report has shown.

This resulted in investment losses of €62.6bn during the year after three years of positive investment returns.

PFZW’s average return over 10 years fell from 8 per cent in 2021 to 4 per cent in 2022.

Despite the negative returns, the pension fund’s current funding ratio and policy funding ratio increased over the year.

Its current funding ratio ended the year at 108.7 per cent, up from 106.6 per cent the previous year, while its policy funding ratio increased from 99.7 per cent to 111.5 per cent.

PFZW had pension investment assets of €216.5bn and liabilities of €200.7bn at the end of 2022.

It received €7.9bn in premium contributions and paid out pension benefits of €4.9bn during the year.

In the preface to the report, PFZW board chair, Joanne Kellermann, described 2022 as an “eventful year”.

“In 2022, PFZW achieved a historically poor return of -22.6 per cent on its investments,” Kellermann continued.

“This was mainly caused by the sharp rise in interest rates. An important part of the interest rate risk is hedged through investments in fixed-income securities.

“Because the value of the investments moves along with the value of the liabilities, the financial position and therefore the funding ratio of PFZW is less sensitive to interest rate changes.

“However, a rise in interest rates will result in a loss on fixed-income investments. On the other hand, the value of the pension obligations decreases when interest rates rise, which increases the funding ratio.

“Despite the negative return, measured according to the rules of the current pension system, PFZW is therefore financially better off than a year ago.”

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