Pension funds’ funding ratio stable

Statistical News Release
Date 14 March 2012

The average funding ratio of pension funds has remained relatively stable in the past two months. At the end of February 2012, it stood at 99% from 98% at end-December 2011. The funding ratio – the ratio of available assets to liabilities – was influenced in particular by rising equity prices on the one hand and falling long-term interest rates on the other.

Funding ratio of Pension funds

Equity prices climbed between end-December and end-February. The MSCI-world index for instance gained 8.9% (see table 3.1). Rising equity prices push up the value of pension funds’ equity portfolios. As a result, the funds’ available assets increase. Pension funds’ liabilities, however, also rose between end-December and end-February. This rise was caused by a drop in long-term interest rates (15-year, Table 1.3) from 2.93% to 2.77%, the lowest level since August 2010. Amid lower interest rates, pension funds are obliged to reserve additional funds for future pension benefits. During the past three months, DNB decided to adjust the nominal interest rate term structure as a consequence of current exceptional market conditions. The interest rates mentioned above therefore are three-month averages.


The pension sector as a whole was still facing a funding deficit at the end of February. A funding deficit is defined as a funding ratio below 105%, the minimum required own funds a pension fund must hold at all times. At end-February, 205 Dutch pension funds, totalling 4.9 million active members and 2.2 million retirees, faced funding deficits. At end-December, there had been deficits in 229 pension funds numbering 5.0 million active members and 2.3 million retirees.