NETHERLANDS - The effect of the three-month average discount rate for liabilities has become almost negligible, as equity markets have improved only slightly while long-term interest rates remain low.

According to Pim van Diepen of Mercer Investment Consulting, the difference between the daily forward curve and the average of the previous three months is no more than 6 basis points.

At the end of 2011, the Dutch pensions supervisor (DNB) introduced the three-month average to relieve pension funds of fluctuating coverage ratios triggered by volatile long-term interest rates.

The adjustment caused schemes' funding to increase by approximately 3 percentage points to 98% on average.

Van Diepen pointed out that 30-year interest rates had fallen further - by 5bps - to 2.45% during April.

In this period, Dutch pension funds' coverage ratios dropped to 98.7% on average, according to Mercer's calculations.

Earlier this week, pensions adviser Aon Hewitt concluded that Dutch schemes' average funding had dropped by 1 percentage points to 99%.

Tim Monten, financial risk manager at the consultancy, said the forward curve's three-month average was still 5bps above the current rate.

"However, as soon as the long-term rates rise again, the positive effect of the average rate will decrease," he said.

According to Aon Hewitt, equity markets fell by 0.53%, while the euro lost 0.8% against the US dollar in April.

It added that commodities markets rose by 0.1% during the past month.

Earlier, the DNB said it would stick with the three-month average discount rate until the impact of a new financial assessment framework (FTK) had become clearer.

Social affairs minister Henk Kamp is to present FTK proposals - including his views on a new discount rate - later this month as part of an overall elaboration of the Pensions Agreement.

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