Statistical News Release: Financial position of Dutch pension funds deteriorated in the second quarter of 2019
Data submitted by Dutch pension funds to their supervisor, De Nederlandsche Bank, show that their financial position deteriorated in the second quarter of 2019. The value of their liabilities, which represent current and future benefit payments, grew by EUR 96 billion to EUR 1,463 billion, largely on the back of lower interest rates in the financial markets.
Pension assets also went up, but less steeply, growing EUR 55 billion to EUR 1,488 billion. The second quarter saw an increase in the number of pension funds that had dropped below the 104.2% policy funding ratio. Together, these funds administer 60% of all pension rights in the Netherlands. This figure stood at 56% in the first quarter of 2019.
Funding ratio of pension funds down to 101.8%
The weighted average of the funding ratios of all Dutch pension funds declined to 101.8%, down 3 percentage points from the first quarter (see Chart 1). The funding ratio reflects a pension fund’s current financial position, expressing the ratio between available assets and liabilities.
The policy funding ratio, which is the average of the funding ratios for the past twelve months, is a relevant factor in a pension fund's decision about benefit curtailments or indexation. It fell by 1.3 percentage points to 106.0% in the second quarter of 2019.
Pension funds whose policy funding ratio is below 104.2% administer 60% of all pension rights in the Netherlands
The policy funding ratios of 51 pension funds are below 104.2%. Between themselves, they administer 60% of all pension rights of active members, deferred members and pensioners (see Chart 2). These pension rights accrue under occupational pension schemes. They supplement Dutch state pension benefits.
The policy funding ratios of 53 pension funds are above 104.2% but below the 110% threshold required for full or partial indexation. Together, they are responsible for roughly 20% of all pension rights. Lastly, 101 pension funds have policy funding ratios in excess of 110%, meaning they are permitted to provide for indexation. They administer another 20% of all pension rights. It must be noted that an individual may have pension rights administered by multiple pension funds.
The split of pension rights in funding ratio (instead of policy funding ratio) show a somewhat different picture. The funding ratios of 75 pension funds are below 104.2%. Together, these funds administer 63% of all pension rights in the Netherlands (see Chart 3). The 60 pension funds that have funding ratios between 104.2% and 110% administer over 27% of all pension rights. Lastly, the 70 pension funds with funding ratios of 110% and over are responsible for 9% of all pension rights.
We used the following statistics to compile this news release: