The indicative average funding ratio of Dutch pension funds rose to 127 per cent in October, according to Aon’s Pension Thermometer.

This represents a 5 percentage point increase compared to the end of August, when it fell to 122 per cent.

Aon stated that October had turned out to be a good month for investments, with developed country equities and fixed-income securities rising, leading to an increase in the funding ratio.

Meanwhile, the interest rate for shorter maturities fell, while liabilities remained “more or less the same”.

The indicative policy funding ratio, based on the average funding ratio over the past 12 months, rose to 120 per cent in October.

Aon said that this offers room for indexation, and with these higher funding ratios, the urgency for a new pension system seems much less.

Financial markets were more positive in October, according to Aon, causing equities to rise by 5 per cent.

Global equities were up 6.6 per cent, while emerging markets equities were down 4 per cent.

Real estate shares stabilised after significant losses with a return of more than 1 per cent.

After the sharp rise in interest rates in recent months, there was hardly any movement in this month, as a result of which the fixed-income portfolio made only 0.2 per cent return.

Overall, the portfolio increased by approximately 3 per cent.

Commenting on the prospect of the new pension system, due to be introduced in July 2023, Aon Wealth Netherlands CEO, Frank Driessen, said: “Despite the fact that it is nice that pension funds have buffers, that the participants can get along with a transition does not necessarily make it any easier, although that is often the first thought.

“Higher interest rates will increase the compensation costs for the abolition of the doornsee premium. The required entry coverage ratios will also be higher. Although, of course, it is easier to distribute surpluses than shortages.

“This year has shown that the funding ratios can change quickly. It is therefore a bit early to assume that the funding ratios will still be that high at the time of transition. The required entry coverage ratios will also be higher. Although, of course, it is easier to distribute surpluses than shortages.”

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