The financial positions of the five largest pension funds in the Netherlands were largely stable over the second quarter as investment returns largely offset the negative effects of falling interest rates, the criterion for discounting liabilities.

The schemes reported quarterly returns of up to 4.9%, resulting in a slight increase in funding at all but one of them.

The €372bn civil service scheme ABP and the €179bn healthcare pension fund PFZW, however, warned that rights cuts were still a distinct possibility next year, as funding at most of the five largest schemes has already fallen near the lowest level allowed.

ABPsaw its funding increase by 0.2 percentage points to 90.6%, just above the critical level of 90%, which, at year-end, would trigger immediate rights discounts under the new financial assessment framework (nFTK).

The civil service scheme said all asset classes had contributed positively to its quarterly return of 3.9%, which took the year-to-date return to 6.2%.

Commodities, its strongest-performing asset class, produced a 14.5% return over the period. 

Within the fixed income portfolio, long-duration government bonds, credit and emerging market debt were the best performers, returning 7.4%, 3.5% and 6.9%, respectively.

ABP’s stake in property, private equity and infrastructure returned 4.4%, 3.2% and 4.5%, respectively.

The pension fund, however, lost 0.2% on balance on its interest, currency and inflation hedges.

PFZW’s funding rose by 0.1 percentage point to 89%, 2 percentage points above the critical level set for the scheme.

The healthcare pension fund, which reported an overall return of 4.3%, said its 4.4% commodities portfolio returned 17.7%.

Local-currency emerging market debt and government bonds were PFZW’s best-performing asset classes, returning 5.7% and 5.3%, respectively.

BpfBouw, the €54bn pension fund for the building sector, saw its funding increase by 0.9 percentage points to 104.8%.

It posted a quarterly return of 4.9%, producing returns of 3.9%, 4.1% and 4.2% on fixed income, equity and property, respectively.

PMT, the €66bn scheme for the metalworking and mechanical engineering sectors, returned 4.7%, leading to a 0.2-percentage-point increase in its funding, which now stands at 92%.

However, Guus Wouters, its director, cautioned that the pension fund was “increasingly falling behind on its mapped-out recovery path”, and that rights cuts “seem to be coming closer”.

He also argued that the new pension contracts arising from the new pensions system “would also generate disappointing pension results in the current financial environment”.

PME, the €44bn scheme for the metal and electro-technical engineering sectors, reported a quarterly return of 3.9% and saw its funding remain stable at 90.8%.

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