The average funding ratio of Dutch pension funds declined by approximately 1 percentage point over the month of December 2013, according to Aon Hewitt and Mercer.
The consultancies estimated that the average funding rate at the end of last year came to 109% and 108%, respectively.
As a result of the decline, dozens of Dutch pension funds will face additional benefit cuts.
The decline in December varied widely from one pension scheme to the next, according to Mercer’s Dennis van Ek.
“For schemes that did not hedge more than, say, 25% of their interest-rate risk, and that invest some 50% in equities, the decline will be limited from one-quarter to half of a percentage point.
“For schemes that have extensive interest-rate risk hedges in place and do not invest a lot in equities, the decline may be as much as 2 percentage points.”
According to Aon Hewitt, 30-35 pension funds will have to implement benefit cuts.
Figures published by pensions regulator DNB previously showed that 34 schemes were facing a funding shortfall based on funding ratios at end of November.
Because funding rates have fallen across the board in December, van Ek believes those 34 schemes will definitely not escape cuts, and that there may be more schemes added to the list as a result of December’s decline.
However, because some sponsor companies may bail out their corporate schemes, that number could change.
Consultant Aon Hewitt believes there is no doubt the two metalworkers schemes, PME and PMT, will have to cut benefits.
Both have funding rates hovering right around the required minimum rate.
PME reported a funding rate of 104.6% – just over the required minimum – at the end of November.
The scheme will publish its end of December rate around the middle of January, according to Hans Sieraad, head Finance, Control and Risk Management at PME.