The five largest pension funds in the Netherlands saw their assets under management shrink by some €103bn in the second quarter of 2022. At the same time, however, funding ratios have risen considerably.

According to €486bn civil service scheme ABP, this paradox proves the need to switch from a defined benefit (DB) to a defined contribution (DC) system.

ABP’s president Harmen van Wijnen said: “Most of our members cannot follow this anymore. We had been generating great returns for years but couldn’t increase pensions. But in 2022, though our returns have been negative we can still increase pensions.”

PFZW’s Joanne Kellermann also spoke of an “inexplicable paradox”. She said: “In the new pension system, contradictions like this will luckily not occur anymore.”

Despite their large investment losses, the five funds were all able to index pensions. For members of ABP, PFZW, PMT and PME it was the first pension increase since 2008.

The Netherlands’ largest five pension funds – ABP, PFZW, PMT, Bpf Bouw and PME – which manage €911bn between them, saw their combined assets under management sink by €103bn in the second quarter alone.

Investment losses of the five funds over the quarter ranged from 8.4% (ABP) to 15.8% (PMT). Total year-to-date losses for the funds together now amount to more than €163bn.

Investment returns (%)
 Q2 2022H1 2022
ABP -8.4 -11.9
PFZW -11.5 -18.0
PME -13.3 -20.1
PMT -15.8 -23.4
BpfBouw -9.6 -15.9

High inflation, tighter monetary policies by central banks across the globe and the war in Ukraine all contributed to the losses as equity and bond markets registered double-digit losses. Only commodities and non-listed investments including real estate registered positive returns.

Funding ratios rise

Despite the significant investment losses, funding ratios continued to rise as liabilities decreased at an even faster pace thanks to higher rates.

The average actuarial interest rate almost doubled over the quarter from 1.1% to 2%.

As a result the funding ratio of construction sector scheme Bpf Bouw increased from 129% to 137% while ABP’s funding ratio went up by more than five percentage points to 123% at the end of June.

Funding ratios rise (%)
 2021Q1 2022Q2 2022
ABP 110.6 117.4 122.7
PFZW 106.6 110.2 113.0
PME 108.3 110.8 112.4
PMT 106.7 108.2 109.3
BpfBouw 125.1 129.2 137.0

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