NETHERLANDS - Dutch pension funds' average coverage ratios remained unchanged last month, hovering around the required minimum level of 105%, according to Aon Hewitt.

The consultancy said rising equity markets largely offset the effects of falling long-term interest rates - the criterion for accounting liabilities.

It pointed out that funding had been artificially inflated since the pensions regulator ruled at the end of last year that schemes would be allowed to discount their liabilities against a three-month swap-rate average, rather than more volatile daily rates.

Funding improved by a few percentage points as a result to 98% on average, and the number of pension funds that had to announce cuts dropped from approximately 180 to 125.

Aon Hewitt noted that, due to falling rates in recent months, the current average is considerably higher than for the daily rates.

During January, the 30-year swap rate increased by 0.04%, whereas the equity markets continued their upward trend, increasing by 2.6% on average.

Aon Hewitt added that equity markets had risen by almost 16% since October.

The consultancy said commodity markets had improved by 3.8% on average, while the euro appreciated by 2.2% against the US dollar.

However, if the Dutch regulator decides to adjust or to reverse its decision to allow the three-month average, average funding will be affected, warned Raymond de Kuiper, director of risk and financial management consultancy at Aon Hewitt.

Previously, Dennis van Ek, actuary and principal at Mercer, warned that the three-month average on liabilities would lose its impact if interest rates were kept at currently low levels and equity markets remained flat.