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Philips' Dutch pensions funding recovers to 126%

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  • Philips' Dutch pensions funding recovers to 126%

NETHERLANDS - The €13.4bn Dutch pension fund of electronics giant Philips returned 7.2% on its investments at the end of the third quarter this year.

The scheme saw its cover ratio rise by 4 percentage points to 126% during this period, which is almost 20% above its required funding ratio, officials said.

They attributed the improvement of the pension fund's position not only to the positive returns, but also to decreasing pension liabilities following a slight decrease in long-term interest rates.

To reach a balance between limiting investment risks and creating a long-term perspective for indexation, the Philips scheme has divided its assets into a liability-matching portfolio and a return portfolio.

Its 71% liability-matching portfolio - consisting of fixed income investments - returned 6.1% and exceeded its benchmark by 1.3 percentage points.

The combined investments in equity, property, commodities and hedge funds in its return portfolio delivered gains of just over 10%, which is slightly short of its benchmark.

The Philips pension fund has 18,120 active participants, 60,200 pensioners and 32,590 deferred members.

Elsewhere, the €4.4bn pension scheme of steelworks Hoogovens said its cover ratio rose 6 percentage points to 118% in Q3 2009.

Despite exceeding its required funding ratio of 115%, officials stressed that prudence remains necessary "as the recovery of the financial markets is still vulnerable".

Officials added: "Moreover, we are expecting liabilities to increase, as a consequence of rising life expectancy. Therefore, the measures of the recovery plan still need to be carried out."

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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