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Longevity drags down Philips coverage ratio despite strong returns

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NETHERLANDS – The €15.2bn Philips pension fund saw its coverage ratio drop slightly to 104.1% despite a quarterly return of 3.2% and a year-to-date profit of 12.9%.

The scheme said its participants’ life expectancy had exceeded the national average, leading to an additional provision for liabilities of 2 percentage points of funding.

It said its 71% liability-matching portfolio – chiefly consisting of fixed income investments – returned 3.5% during the last quarter of 2012, thanks to falling interest rates.

It also noted that the quarterly profit of its liability-matching holdings fell 1.9% short of the benchmark, due to the strength of Spanish and Italian government bonds, to which the scheme has limited exposure.

During the last three months of 2012, the scheme’s return portfolio of mainly equity, property and commodities generated 2.4% on the back of rising equity markets and high-yield bonds.

The required funding for the Philips scheme is 104.2%, while the prescribed financial buffers equate with a coverage ratio of 107%.

The pension fund said it would be able to grant indexation only once it met its financial-reserves requirements.

The Philips Pensioenfonds has 14,670 active participants, 59,680 pensioners and 33,060 deferred members.

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  • QN-2546

    Asset class: Real Estate Equity Fund (non listed).
    Asset region: Europe.
    Size: Total CHF 600m, approx. CHF 100-300m per fund investment.
    Closing date: 2019-06-28.

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