Falling interest rates over the course of 2014 have led to funding shortfalls at four of the Netherlands’ five largest pension funds, according to fourth-quarter reports.

The only exception was the €47.6bn pension fund for the building industry, BpfBouw, which saw funding slightly increase to 114.5% on the back of an annual return of 24.3%.

The €344bn civil service scheme ABP reported a return of 14.5%.

However, over the fourth quarter of 2014, its coverage ratio fell by 2 percentage points to 101.1% – 3.1 percentage points short of the minimum required level.

Cees de Veer, ABP’s vice-chairman, said the pension fund did not yet have to “take measures” on the shortfall but conceded that ABP was concerned how funding might evolve over the course of 2015.

Dutch pension funds, following the introduction of the new financial assessment framework (FTK) on 1 January, must now use the average funding of the previous 12 months to calculate their coverage, rather than the average market rate of the previous three months.

According to the Dutch Pensions Federation, the new “policy funding ratio” would be slightly higher at most schemes.

ABP said its new coverage would be 104.7%.

The Federation warned that, as long as interest rates – the criterion for discounting liabilities – remained low, the new accounting method was likely to show a downward trend this year.

ABP reported quarterly results for equity and fixed income of 3.7% and 3%, respectively.

Returns on real estate and private equity were 9.2% and 4.2%. 

The scheme lost 22.6% on its commodities portfolio due to falling oil prices, while its hedge of 25% of the interest risk on its liabilities contributed 3.7 percentage points to its annual result.

Meanwhile, the €162bn healthcare scheme PFZW reported annual and quarterly returns of 15.5% and 3.1%, respectively, while its funding fell by 3 percentage points to 102% over the last quarter. 

PFZW made a positive quarterly return on almost every asset class, with commodities (-33%) being the exception.

It said its interest hedge of one-third of its liabilities contributed 8.4 percentage points to its annual performance. 

BpfBouw said its hedge of approximately 60% of its interest risk accounted for 15.5 percentage points of its 2014 return.

Its 45% fixed income portfolio, with an annual return of 12.5%, also performed well, it said.

However, because falling interest rates also increased its liabilities, the scheme’s funding ratio increased by just 0.7 percentage points as at year-end, it said.

BpfBouw’s investments in equity, property and alternatives returned 18.1%, 8.8% and 1.5%, respectively, over 2014, while fourth-quarter results were 4.2%, 2.6% and -6.5%, respectively. 

The €58.5bn metal scheme PMT reported a quarterly return of 5.9% and an annual return of 20.6%, although its coverage ratio increased by just 0.2 percentage points to 103% over the last quarter. 

PMT said its 58% fixed income allocation produced an annual return of 26%, adding that equity, property and alternatives returned 12.2%, 15.6% and 17.4% over the period.

The €39.5bn metal pension fund PME, meanwhile, returned 4.8% in Q4 and 17.8% over the course of 2014.

However, liabilities increased by 20% over the same period, while funding fell by 0.6 percentage points to 102% in the fourth quarter. 

PME’s chairman Franswillem Briët warned that persistently low interest rates could force the pension fund to take measures that would have an “enormous impact” on participants and pensioners.

Over 2014, PME returned 11.5% on equity and 12.9% on fixed income.

The scheme’s 50% interest hedge contributed 5.5 percentage points to its annual result.