NETHERLANDS – Dutch pension fund assets have surpassed €1trn, new statistics published by Dutch regulator De Nederlandsche Bank (DNB) reveal.
DNB spokesman Tobias Oudejans told IPE's sister publication IPNederland that pension fund assets topped a record €1,007bn as of end of December 2012, amounting to €60,189 for every Dutch man, woman or child.
Over the course of 2012 pension fund assets increased by over 15%, or €134bn, from the previous year's level of €873bn. The increase is both a result of member contributions and investment returns. A year earlier, the combined assets of the Dutch pension funds grew by €71bn to nearly €802bn, a rate of slightly less than 9%.
However, despite record levels of pension savings, the latest solvency data from DNB showed the average coverage ratio of Dutch funds at the end of February as 104% – one percentage point below the mandatory 105% minimum.
According to calculations by consultancy Aon Hewitt, the average Dutch pension fund's coverage ratio has since increased, estimated at 106% at the end of March. But Frank Driessen, chief actuary and principal client consultant at Aon Hewitt, cautioned that the increase was in part the result of ultimate forward rate (UFR) accounting combined with using a three month average discount rate.
Additionally, funding was recently boosted by pension funds' abilty to take account of planned rights cuts. In February, 68 of the 415 remaining Dutch pension funds announced cuts, effective from 1 April. Pension liabilities were lowered as a result of the cuts "which amounts to a rise in funding rate of approximately 1 percentage point," Driessen said.
Without UFR accounting and three-month average discounting, and without the positive effect on funding of benefit cuts, the average coverage ratio would stand at just 99%, according to Driessen.
"Despite a funding rate above the legal threshold there is little reason for optimism," the consultant told IPNederland. "The market is taking a different view of long term interest rates and hence it is questionable if the UFR of 4.2% will turn out to be sustainable in the long run, and if so, in which form."
"In addition pension funds are exposed to equity risk, and shocks may push the funding rate back [below the minimum]," he said.