During the first quarter of 2011, the financial position of pension funds continued to improve, figures released by De Nederlandsche Bank show. The average funding ratio rose from 107% at end-2010 to 112% (Table 8.8). The improvement of the funding ratio – the ratio of available assets to liabilities – was associated with rising long-term interest rates, which depreciated pension funds’ liabilities. Meanwhile, pension funds’ available assets (investment) showed a slight decline.
The liabilities of pension funds, represented by the so-called technical reserves, fell by EUR 41 billion to EUR 660 billion in the first quarter of 2011, making this the second quarter running of declining pension fund liabilities (see Chart). The higher interest rates allows pension funds to reduce provisions for future benefit payments. During the final quarter of 2010, long-term rates had already increased, from 3.0% to 3.8%. The first quarter of 2011 saw a continued rise, from 3.8% to 4.0% (Table 1.3).
Pension funds’ available assets declined slightly during the quarter under review, from EUR 748 to EUR 738 billion. Also for the second quarter running, the value of pension funds’ investments declined as well, after having appreciated continuously since March 2009. As a result of the market rate increase, pension funds realised a negative return on their fixed-rate instruments’ portfolio (table 8.9). The return on assets and real estate failed to compensate this loss.
The rise in funding ratios occurred across the range of pension fund types. The average funding rate of industry-wide pension funds increased from 105% to 110% during the first quarter, while that of company pension funds rose from 112% to 116% and that of occupational pension funds from 117% to 126%. The number of members of pension funds in a funding deficit situation – i.e. whose funding ratio is below 105% – came down from 3.0 million to 1.2 million.
For further information, please telephone Tobias Oudejans (+31(0)20-5243100, +31(0)652496961) or Herman Lutke Schipholt (+31(0)20-5242712, +31(0)652496900).