All five Dutch large pension funds have funding ratios above 100 percent. These figures are based on data from the pension funds Thursday. ABP, which is the largest pension fund, reported that it has sufficient cash on hand to pay all participants’ pensions as long as they are alive.
Funding ratios are used to assess the financial health of funds. This is the difference between how much money a fund must have in cash and how much it will pay in future pensions.
This is how it is decided at the end if the pension benefits should decrease.
Recent years have seen pension discounts (reductions of pensions), mainly because the funding ratios of large funds were close to or below the critical level of 90 percent.
Filling pension pots is better
Slowly, this fear is fading. ABP’s funding ratio climbed to 104.5 percent in the last quarter. It was still at 100.5 per cent at the end of quarter 1. Zorgpensioenfonds PFZW reported a 100.9 percent increase in coverage, compared with 97.5 percent at Q1.
The metal sector also saw better filling of pension pots. The coverage ratios for PME and PMT funds increased to 104 percent and 101.5 percent, respectively. Bouwfonds BpfBOUW had a coverage ratio of 120.8 percent.
The increase was due to real estate investments
The reason for the increase in pension funds’ investments is mainly the positive returns. bpfBOUW cites as an example the contribution of the international real estate portfolio and the Dutch real estate market.
ABP believes that the future outlook is brighter due to the increased funding ratio. Chairman Corien WortmannKool said, “I can therefore tell for the first-time in ages that there is very little chance of a retirement reduction next year.” “But a pension hike is still not in sight.”