The indicative average coverage ratio of Dutch pension funds fell by 1 percentage point to 121 per cent in August 2023, according to Aon’s latest Pension Thermometer.

Aon noted that, despite the further increase in interest rates, poor equity returns were the primary driver for the fall in the average coverage ratio.

The indicative policy funding ratio, which is the average coverage ratio of the past 12 months, also fell in August, from 120 per cent to 119 per cent.

During the month, returns on developed market equities decreased by approximately 1.5 per cent, while emerging market equity returns fell by 4.7 per cent, according to Aon.

Furthermore, although inflation developments were “favourable”, interest rates and risk premiums rose slightly during August, resulting in a negative effect on fixed-income assets.

Riskier bonds, such as high yield and emerging markets local currency, decreased in value by 0.4 per cent and 1.5 per cent respectively, with the overall average fixed-income portfolio falling by 0.1 per cent, Aon stated.

Overall, Aon estimated that Dutch pension funds’ returns decreased by 1.5 per cent in August.

Aon added that the landscape in regard to the Future Pensions Act in the Netherlands was “shaping up”, but the pressure on the sector “remains great”.

Social partners must have their transition plans ready by 1 January 2025 and pension funds must have their implementation plans ready by 1 July 2025.

"Because January 1, 2025 has remained intact, we see that it squeaks and creaks," says Aon Netherlands CEO wealth solutions, Frank Driessen.

"It is therefore important to maintain a good balance and to develop a plan B in case things go wrong.

“Communication is and remains key in this transition. It is important to take the participant into account.

“We advocate using communication through various channels. This appears to be the most effective. Participants want communication in a form that appeals to them at a time that suits them.”

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