Ratios bounce back
The cover ratios of industry-wide funds in the Netherlands rose significantly last year. According to data from the VB, the Dutch Association of Industry-wide Pension Funds, their affiliated pension funds rose to an average 111.2% at the end of 2003 – up from 106.5% a year earlier.
Coverage ratios were at the heart of controversial requirements from the Dutch pension supervisor, the PVK, the Pensioen - & Verzekeringskamer, which had caused outrage with a requirement that pension funds have a solvency ratio of at least 105%.
In particular, the figures for the three biggest industry funds ABP, PGGM and PME, which have released double-digit returns for 2003, show that their coverage ratios have now recovered.
Civil service fund ABP says it returned 11%, with its coverage ratio up to 109% from 103%. The fund grew by E14.8bn in the year and stood E150.4 bn. ABP’s investment director Jean Frijns says: “We are happy with the 2003 result.” He adds the 11% return was above its minimum required return of seven percent a year.
Meanwhile, healthcare fund PGGM returned 15%, with its coverage ratio at 105%. The fund grew from E49.7bn to E52.9bn as at the end of the fourth quarter.
“Following two years of negative returns, the financial year 2003 was an excellent year for PGGM’s investments, in particular the second and fourth quarter,” says Roderick Munsters, managing director of investments, based in Zeist.
“In 2003 we were successful in maintaining our long-term investment policy of a well-diversified portfolio focused on real assets (equities, real estate, commodities are approximately 70% of total investments).”
Schiphol-based PME, Bedrijfstakpensioenfonds Metalektro – the pension fund for the metals industry, disclosed that it returned 13% in the year, taking it to E14bn. The coverage ratio has risen to 109%.
But eight of the VB’s 81 members still have a cover deficit, as defined by the insurance and pension regulator the PVK. One fund had a cover ratio below 100%. In its controversial letter of September 2002, the PVK called for a surplus of 5% over a funding ratio of 100%.
The VB, says that the assets of its members rose by a combined E29bn in 2003. It added they held E27bn more in reserve than strictly required by the insurance and pension regulator the PVK.
The assets of the published funds amounted to a combined E312bn euros, or equivalent to two-thirds of the assets accrued by all Dutch pension funds together.
The VB added the funds’ overall pension liabilities, including general risks reserves, rose by E16bn and totalled E285bn at end 2003.
The eight funds with a cover deficit are the funds for Agrarische en Voedselvoorzieningshandel; Stichting Federatief Pensioenfonds; Herwinning Grondstoffen; Horeca en Catering; PNO; Rubber- en Kunststoffenindustrie; Textielindustrie.Uitvaartbranche. The one fund in actual deficit is the Stichting Federatief Pensioenfonds.
Vroegpensioenfonds Mortel- en Morteltransportondernemingen had the highest cover ratio, 266%.
The VB members represent 5.7m active members and pension beneficiaries.