Dutch pension funds saw their average coverage ratio rise to 126 per cent in July, driven by strong equity performance and a slight rise in interest rates, according to Aon Netherlands.

The easing of geopolitical tensions – particularly following the passage of the US’ One Big Beautiful Bill Act – also supported market sentiment. Strong equity returns, combined with a slight increase in interest rates, saw the funding ratio climb 2 percentage points, from 124 per cent to end the month at 126 per cent.

Aon’s Pension Thermometer also found that the policy funding ratio, based on the average of the funding ratio over the past 12 months, also increased by 1 percentage point to 119 per cent at the end of July.

The US Congress’ passing of the One Big Beautiful Bill Act 2025 supported markets by extending Trump-era tax cuts and avoiding new levies on foreign investors.

Nevertheless, Aon cautioned that global trade tensions remained high. The US, for example, has postponed the expiry of mutual tariffs until 1 August, with new tariffs for various countries: Japan and Korea (25 per cent) and the EU (30 per cent higher than expected).

The US President threatened new tariffs on countries aligning with BRICS nations such as Brazil, Russia, India, China, and South Africa. Despite the threats, Aon said financial markets priced in less aggressive tariffs and continued to rise steadily.

With the EU and Japan having agreed to US trade terms, attention is now shifting to a trade deal with China, which has a deadline of 12 August for an agreement.

In terms of performance, developed market equities rose by 2.9 per cent and emerging market equities by 4.6 per cent. In the eurozone, capital market interest rates rose slightly, resulting in a 1 per cent decline in the fixed-income portfolio.

High-quality corporate bonds achieved a positive return of 0.5 per cent while lower-quality bonds, such as high-yield and emerging market debt, rose in line with equities, by 0.7 per cent and 1.3 per cent, respectively. The total return of the portfolio was approximately 1.5 per cent.

On the interest rate side, in July, the risk-free interest rate for the first 40 years rose by an average of seven basis points. The Ultimate Forward Rate (UFR), which pension funds use to calculate the value of their future liabilities, stood at 2.4 per cent. The rise in interest rates caused the value of liabilities to fall by approximately 1.3 per cent; combined with the increase in assets in July, the funding ratio rose to 126 per cent.

Furthermore, Aon commented on the funding positions of some of the larger schemes in the country, which have seen improved positions in the second quarter of 2025. For example, the funding ratio of ABP rose from 115.6 per cent to 117.5 per cent and that of PFZW from 114.3 per cent to 117.5 per cent.

Aon Netherlands director wealth, Frank Driessen, said: “The increase in coverage ratios provides additional prospects for raising pensions at the end of 2025. Pension funds will also consider whether sufficient assets will remain available to enable a balanced transition to the new pension system.”

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