Average funding ratio at highest level since June 2011

Statistical News Release
Date 19 December 2013

The average funding ratio of Dutch pension funds increased to 111% in November 2013. At the end of September 2013, the average funding ratio stood at 108%. This increase of the funding ratio – the ratio between available assets and liabilities – is due mainly to the rise in the interest rate term structure and equity prices. Consequently, the funding ratio reached the highest level since the end of June 2011.

The interest rate term structure (Table 1.3) rose in October and November. For instance, 20-year rates were up by 8 basis points to 2.79%. 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. Excluding the ultimate forward rate (UFR) and averaging, however, interest rates declined, albeit modestly. As a result, the value of the fixed-income portfolio increased.

Equity prices (Table 3.1) rose considerably in these months. The MSCI World index was up by 5.9% and the AEX rose by 5.8%, pushing up the value of pension funds’ equity portfolios. All these developments had a positive impact on the funding ratio.
At end-November 2013, 34 of the 290 pension funds investing at fund’s risk had a funding ratio below 105% and consequently faced a funding deficit. This number was down by 53 from end-September 2013. At end-November, the pension funds facing a funding deficit represented well over 600,000 active members and nearly 400,000 pensioners.

Pension funds' funding ratios