NETHERLANDS – Dutch pension funds' average coverage ratio dropped from 104% to 102% in June due to falling equity markets, according to figures from Mercer.
Edward Krijgsman, monitoring team leader at the consultancy, pointed out that both the MSCI World and Europe indices had fallen by approximately 2% over the month.
Dutch schemes' average funding level already dropped by 3 percentage points to 104% in May, based on the official accounting rate for liabilities – the three-month average of the forward curve with the application of the ultimate forward rate (UFR).
Krijgsman attributed the drop in particular to investor uncertainty over central banks' willingness to continue with various quantitative-easing measures.
Last month, the official accounting rate rose slightly from 2.63% to 2.65%, whereas the market rate – the forward curve for 30-year interest swaps – increased by 7 basis points to 2.57%.
Based on the market rate, Mercer calculated the funding at 102.5% on average, as of the end of June.
The €292bn civil service scheme ABP and the €134bn healthcare pension fund PFZW closed the previous month with respective funding ratios of 99% and 102%, it said.
At the end of last week, Aon Hewitt placed the average coverage ratio at no more than 101%.
Dutch pension funds will have to increase their funding levels to at least 105% by the end of this year to avoid any additional rights discounts.
The government has already granted them a two-year extension to the legal three-year term for recovery plans, as well as more favourable terms for accounting liabilities.