The coverage ratios of the largest pension funds in the Netherlands, ABP and PFZW, fell further in July. Both funds had a coverage ratio below the critical 95 percent limit at the end of July.
Civil servants fund ABP, the largest pension fund in the Netherlands, had a coverage ratio of 93.9 percent on 31 July, a decrease of 1.4 percentage points. Pensioenfonds Zorg en Welzijn (PFZW) saw the coverage ratio fall from 95.9 percent to 94.8 percent.
Funds that have a coverage ratio below 95 percent on 31 December this year must already cut short next year.
According to ABP, the fund again suffers from the low discount rate. The ABP achieved 8 billion euros in investment income, but this profit could not compete with the low discount rate.
Lower actuarial interest
The lower the discount rate, the more money a pension fund must have in cash to theoretically meet its future obligations. That actuarial interest rate is the return that pension funds can earn risk-free and is set by De Nederlandsche Bank on the basis of interest rates on financial markets.
Research firm Aon already reported last week that the funding ratios of pension funds had fallen. The agency already stated that discounts "became an increasingly realistic scenario", due to both falling interest rates and stock market blows.
See also: Impending discounts: Low interest rates are catching up with the pension agreement