Pension funds' funding ratio increased since June

Statistical News Release
Date 19 September 2013

The average funding ratio of Dutch pension funds, which stood at 102% at the end of June 2013, has since increased to 104% in August. This increase of the funding ratio – the ratio between available assets and liabilities – is due mainly to a rise in the interest rate term structure and rising equity prices.

Between end-June and end-August 2013 the interest rate term structure (Table 1.3) rose. For instance, 20-year rates were up by 24 basis points. The rise of the interest rate term structure led to a fall in the discounted value of funds’ liabilities, sometimes referred to as technical provisions. At the same time, the fixed-rate asset portfolio depreciated as a result of the rise in interest rates. Equity prices rose as well between end-June and end-August. The MSCI World index climbed 2.3% while the AEX buoyed by 5.3%. As a result, the value of pension funds’ equity portfolios increased. The combined rise of both interest rates and share prices had a positive effect on the funding ratio.
 
Of the 290 pension funds with investments for the fund's risk, 131 were therefore technically underfunded at end-August, in that they had funding ratios below 105%. This number was down by 37 from end-June 2013. At end-August, the pension funds facing a funding deficit represented 4.2 million active members and 2.1 million pensioners.

Pension funds’ funding ratios