Pension funds’ funding ratios improved in fourth quarter of 2010

Statistical News Release
Date 16 March 2011

During the fourth quarter of 2010, the financial position of pension funds improved, figures released by De Nederlandsche Bank show. The average funding ratio rose from 99% at end-September to 107% at the end of the year (table 8.8). The improvement of the funding ratio – the ratio between available assets and liabilities – was mainly associated with increasing long-term interest rates, which strongly depreciated pension funds’ liabilities.

The liabilities of pension funds, represented by the so-called technical reserves, fell by EUR 62 billion to EUR 699 billion. This fall marked the first decline in pension funds’ liabilities since June 2009 (see Chart). The sustained increase up to the third quarter of 2010 was especially due to a decline in interest rates. Also, the life expectancy of the Dutch increased more rapidly than had been anticipated. During the final quarter of 2010, long-term rates increased again, from 3.0% to 3.8% (table 1.3). The higher rate allows pension funds to reduce reservations in respect of future benefit payments.

Pension funds' funding ratio

The available assets of pension funds declined slightly during the review quarter, from EUR 753 billion to EUR 746 billion. Since March 2009 pension funds’ investments had been steadily appreciating. Although the value of pension funds’ equity investments increased during the fourth quarter of 2010, this appreciation did not offset the loss incurred on fixed-rate investments (table 8.9).
The rise in funding ratios occurred across the range of pension fund types. The average funding rate of industry-wide pension funds increased from 96% to 105% during the last quarter, whereas that of company pension funds rose from 106% to 112% and that of occupational pension funds from 109% to 117%. The number of members whose pension funds have funding deficits – i.e. a funding ratio below 105% – came down from 4.8 million to 3.0 million.

For further information, please telephone Tobias Oudejans (+31(0)20-5243100, +31(0)652496961), Herman Lutke Schipholt (+31(0)20-5242712, +31(0)652496900) or Kees Verhagen (+31(0)20-524 2272, +31(0)621123922).