As many as 37 Dutch pension funds are facing rights cuts early next year despite the fact their average coverage ratios remained stable in November at approximately 110%, according to Aon Hewitt.

The consultancy based it conclusion in part on its own “Pensions Thermometer”, which tracks daily average funding and the development of coverage ratios.

Of the 68 pensions funds that applied rights discounts last April, 37 had already announced conditional cuts in 2014 at the time.

To avoid cuts, pension funds must have a funding of at least 104.3% at year-end.

According to Frank Driessen, chief commercial officer at Aon Hewitt Netherlands, the largest risk for funding is a marked increase in interest rates in December, which would cause the value of fixed income investments to fall faster than liabilities.

“The reason is that liabilities are discounted against the average market rate of the past three months,” he said.

While market rates barely changed in November, the three-month average narrowed slightly, leading to a 0.3% increase in liabilities, resulting in an equal reduction of the schemes’ coverage, Aon Hewitt said.

However, it said the assets of Dutch schemes increased by 0.4% on average in November, mainly due to a 0.3% profit on fixed income investments and 1.1% on worldwide equities, with US equities generating 2.4%.

Aon Hewitt also pointed out that commodities, emerging market equities and non-listed property performed badly in November.

Meanwhile, Mercer said it estimated the average coverage ratio at November-end at 110.9%, reflecting a rise of 0.3 percentage points.

It attributed the increase chiefly to the performance of developed market equities.

Dennis van Ek, actuary and principal at Mercer Netherlands, said the average funding would decrease to 110% at year-end if interest rates remained stable in December.

He echoed Driessen’s view that rising interest rates would come at the expense of the coverage, adding that a fall in rates would be beneficiary for schemes’ funding over the short term.