The coverage ratios at the largest Dutch pension funds improved in the last quarter of 2019. The pension funds benefit from a higher interest rate and positive returns. In all cases, the policy funding ratios were above the critical 90 percent limit, so that the funds do not have to switch to pension discounts.

The largest pension fund in the Netherlands, ABP, saw the coverage ratio increase to 97.8 percent, 6.8 percentage points higher than at the end of the third quarter. Pensioenfonds Zorg en Welzijn (PFZW) also recorded a higher coverage ratio: at the end of December it stood at 99.2 percent.

The policy funding ratio, the average funding ratio over the last twelve months, did fall slightly at the two largest pension funds to 95.8 and 96.5 percent respectively. This means that the pension fund is still above the critical 90 percent limit. If a pension fund is included, they must proceed to the reduction of pensions.

In November Social Affairs minister Wouter Koolmees temporarily lowered this critical lower limit for pension discounts to 90 percent. The measure was necessary because many pension funds ran into problems due to the persistent low interest rates. For example, the coverage ratio of both ABP and PFZW fell slightly below the critical limit in the summer, which meant that discounts seemed inevitable for 5.8 million Dutch people.

In addition, the lowering of the critical lower limit gives employers and trade unions the time and space to work out the Pension Agreement concluded in June. "Peace and stability are needed to do that well in the coming period," said Koolmees at the time.

Other pension funds also see coverage ratios rise

The coverage ratios of the metal funds PMT and PME and the construction fund bpfBOUW also increased in the last quarter to 98.8, 98.7 and 114.1 percent respectively.

Discounts are also not lurking with these pension funds, with policy funding ratios of 97.6, 96.9 and 112.4 percent. The construction fund even announced in December that it would once again raise pensions in 2020.

See also: Ten questions about pensions that you might not dare to ask