NETHERLANDS – The average coverage ratio at Dutch pension funds remained stable over August, according to estimates from Mercer and Aon Hewitt.
The consultancies, which based their calculations on different parameters, concluded that the average funding level at the end of last month was 105% and 104%, respectively.
Mercer added that the official coverage – the three-month average of the forward curve, with the application of the ultimate forward rate (UFR) – was now almost equal to the actual interest curve.
Mercer principal and actuary Dennis van Ek said: “Both the rate of supervisor De Nederlandsche Bank (DNB) and the market rate were just over 2.6%.
“The average market rate rose by 18 basis points to 2.65% in August, while the ‘DNB rate’ has climbed 10 basis points to 2.62%.”
Van Ek added that, if the market rate remained the same in the coming months, average funding would increase by 3 percentage points to approximately 108%.
Aon Hewitt also calculated that the average coverage was level at 104% in August.
The consultancy pointed out that pension funds had just four months to improve their funding to the minimum required level of 104.3%.
Schemes that fail to meet this target will almost certainly have to cut pension rights.
Meanwhile, according to Aon Hewitt’s estimates, Dutch pension funds’ assets decreased by 1.8% on average in August.
It attributed the decline to falling global equity markets and a slight increase in interest rates, which hit government bond holdings.