Interest rate pressure offsets equities growth for Dutch pension funds
Average funding ratios of Dutch pension funds have remained relatively stable since September, as equity prices rose whilst interest rates declined, the Dutch Central Bank DNB released.
The stabilisation of the funding ratio, the ratio between available assets and liabilities is due to a 1.1% rise of the AEX index and a 3.8% rise of the MSCI world, which boosted the value of pension fund equity portfolio’s.
At the same time, the 30-year rate including the ultimate forward rate dropped 14 basis points to 2.22%. As a result, the liabilities – generally referred to as technical reserves – went up in this period, offsetting the effect of equities growth.
According to DNB, among the 263 pension funds with investments for their own risk, 30 had funding ratios below 105% at the end of November 2014. However, the central bank stressed that these shortcomings should be analysed in light of the new financial assessment framework to be implemented as of January 2015.
In the new year, funds with an insufficient financial position will have to submit a recovery plan to the Dutch Central Bank.