Belgian second-pillar pension funds returned an average of 4.4% in 2015, down from 11.06% the previous year, according to a survey carried out by the country’s renamed occupational pension scheme association, PensioPlus.
The survey shows that pension funds and insurers need to invest in the “real economy”, according to a presentation from the association.
This is so they can obtain adequate yields of at least the 1.75% minimum guarantee, and to protect against inflation.
Investing in the real economy is also necessary because bonds are no longer a “safe haven” and increasingly volatile, the association said.
Last year was also characterised by continued positive growth outlooks but diminishing confidence in the financial markets, as well as heightened insecurity and risk aversion, it noted.
Central bank monetary divergence was also a theme.
In 2015, the largest share of Belgian occupational pension funds’ assets was invested in bonds, at 45%, followed by equities at 34%.
Real estate accounted for 5%, liquid assets (cash) 3% and ‘other’ assets 13% (mainly insurance infrastructure, own funds and convertible bonds).
The 4.4% average return figure is based on a sample of 40 pension funds with €14.16bn in total assets.
Just over half of the funds have assets of more than €125m, with an average of €591m.
Fourteen participating funds have assets in the €25m-125m range, while the remainder are smaller than €25m.
Annual returns generated by the pension funds in the sample ranged from less than 1.62% to more than 6.12%, according to PensioPlus.
Over 10 years, Belgian IORPs have on average returned 4.75% on a nominal basis, or 2.85% net of inflation, a presentation from the association shows.
The real return for 2015 is 2.86%.
PensioPlus is the new name of what was formerly called ABIP (Assocition Belge des Institutions de Pensions), with the organisation having last year decided it was time to rebrand.
Its new name is intended to better reflect its work as the association for supplementary pensions, as well as its aim to bring “added value” to its members, the association said.
“The slogan ‘Smarter together for better pensions’ reminds us that we, as a member association and in collaboration with all stakeholders and political decision-makers, want to and can offer better pension solutions and insist on the importance of the second pillar,” said PensioPlus.