NETHERLANDS - Europe's second-largest pension fund, ABP, has said its coverage ratio fell to 88% in August and attributed the drop on historically low interest rates.
Instablity in the market in late August saw the interest rate benchmark drop by 0.78 percentage points to 2.51%, meaning that while many pension funds have now recovered from the financial crisis, they have funding ratios lower or similar to 2008.
ABP said its investment target of 7% a year was still achievable, but that the 10 percentage point fall in coverage ratio did not take into account new actuarial assumptions published last month that were higher than what the fund had predicted, and would therefore have further adverse effects.
ABP's board said it could not guarantee current pension levels, but was working hard to avoid any rights cuts ahead of social affairs minister Piet Hein Donner's imposed deadline of 2011.
The pension fund's current recovery plan specifies a funding level of 96% by the end of the year.
The country's second-largest pension fund, Zorg en Welzijn (PFZW), with assets under management of €96bn, also saw its coverage ratio fall by 9 percentage points over the previous month, while it was down by almost 15 percentage points compared with the end of 2009.
It said that while its portfolio had increased in value, this was offset by the fall in interest rates.
PMT, the fund for the metal and electro-technical engineering industry, was in a similar position as PFZW and saw returns on investments of €2.3bn, increasing its overall value to €37.6bn, which should have seen its coverage ratio rise by 6 percentage points.
However, due to falling interest rates, it's funding level fell from 94% to 85.2%.
Several major Dutch pension funds have launched an advertising campaign hoping to dissuade the government from planned rights cuts.
They argue that if the government proceeds as planned, they will be forced to cut payments drastically, affecting millions of scheme members.
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