The average funding ratio of Dutch pension funds increased to 112% in May 2014, the highest level since April 2011, De Nederlandsche Bank (DNB) has said.

At the end of March 2014, the average funding ratio stood at 111%, and the Dutch regulator said that the modest increase was mainly due to pension funds' positive returns on equities and fixed-rate assets.

DNB said that the falling capital market rates pushed up the value of pension funds' fixed-income asset portfolios and that the equity price developments also impacted the funding ratio positively.

The AEX and the MSCI World index were up 1.0% and 2.4% respectively between end-march and end-May.

However, the interest rate term structure including UFR and averaging declined, which resulted in an increase in technical provisions, DNB said.

The Dutch regulator said that the current interest rate decline is not yet reflected in the interest rate term structure due to interest averaging, and this may push funding ratios down in the months ahead.

Also, of the 275 pension funds with investments for their own risk, 11 had funding ratios below 105% at the end of May 2014.

According to the data, at end-May, the pension funds with a funding ratio below 105% represented 425,000 active members and 200,000 pensioners.

First published 24.06.2014

monique_simpson@wilmington.co.uk