Poor yields, but increased funding levels in major funds – Financieele Dagblad (Registration)

The five largest pension funds in the Netherlands saw their capabilities during the quarter by significant losses on bond and equity markets. At the same time their coverage ratios have improved. As interest rates rose, their liabilities decreased fact.

, according to interim figures released today publish the five major funds. These include to Care Fund PFZW and civil servants pension fund ABP. “We have two exceptional quarters behind it. The first quarter with a good yield of 8.8%, the second with a loss of 4.3%, but also a substantial increase in current funding, “said Corien Wortmann-Kool, president of ABP. The coverage ratios show the extent to which pension funds are able to pay the pensions.

Greek crisis

Losses on investments in the previous quarter were partly due to the unstable situation in Greece. In particular, the escalation of the Greek crisis in the last weekend of June, when the Greeks left the negotiating table led to falling prices. But the greatest losses due to increased interest rates in recent months. Therefore, the funds saw their bonds and interest rate derivatives namely considerably in value. Thus obtained metal fund PMT a negative return of 12.9% on the fixed income portfolio last quarter.

Higher interest

However, a higher interest rate is anything but bad news for pension funds. They calculate their long-term obligations: one based on market interest rates. The higher the rate, the less money they must keep for future pensions. The funding ratios are therefore despite negative yields rose during the quarter. With Care Fund PFZW went to a whopping increase of 8% points, from 95% to 103%.

This year the current funding levels are however not decisive for pension funds. They must now look to the average coverage over the past twelve months. The rebound in the last quarter, this figure does not reflect yet. These so-called policy coverage ratios declined in all funds.

Recovery

ABP, PFZW and metal funds PME and PMT therefore sit still – and even a bit further – below the standard of 105% and thus be not only in a resevervetekort (standard 120 %), but also in a coverage deficit. There they should be out within five years, otherwise threaten discounts. All five funds, including BPF Bouw, having last month to submit a recovery plan because they were below 120%. BPF Bouw now has a policy of coverage of 114%. Because deficits under the new rules may be spread over ten years, none of these funds is still talk of discounts.

Because Dutch Central Bank recently lowered the discount rate, state funds, however, still waiting for a reduction in the funding ratio. In PME will be a negative effect of 0.2% point per month on the policy coverage, according to the metal fund. Guus Wouters, the director of metal PMT fund called the DNB’s decision “a raw deal for our members.”