Over the course of 2012, pension fund assets increased by over 15 per cent, or €134 billion, from the previous year's level of €873 billion. The increase is both a result of member contributions and investment returns. A year earlier, the combined assets of the Dutch pension funds grew by €71 billion to nearly €802 billion, a rate of slightly less than 9 per cent.
However, despite record levels of pension savings, the latest solvency data from DNB showed the average coverage ratio of Dutch funds at the end of February as 104 per cent – one percentage point below the mandatory 105 per cent minimum.
Frank Driessen, chief actuary and principal client consultant at Aon Hewitt, cautioned that the increase was in part the result of ultimate forward rate (UFR) accounting combined with using a three month average discount rate. "Despite a funding rate above the legal threshold there is little reason for optimism", the consultant told IPNederland. "The market is taking a different view of long-term interest rates and hence it is questionable if the UFR of 4.2 per cent will turn out to be sustainable in the long run, and if so, in which form."
"In addition pension funds are exposed to equity risk, and shocks may push the funding rate back [below the minimum]", he said.
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