Falling interest rates lift Q1 return at ING pension fund to nearly 7%

The €20.7bn pension fund of banc-assurer ING has returned 6.6% on its investments over the first quarter.

The scheme cited the effect of falling interest rates on its fixed income allocation of almost 72%, which returned 9.3%.

Last January, the pension fund increased its fixed income allocation by 6.6 percentage points – at the expense of its equity holdings – on the back of strong equity returns last year.

Equities – accounting for 18.4% of the overall portfolio at March-end – returned 1% over the first quarter, mainly thanks to the performance of US and European investments, Pensioenfonds ING said.

It added that it made losses on its emerging market equity investments, without providing further details.

The scheme’s 5% property portfolio delivered a quarterly return of 3%, following positive results for both listed and non-listed real estate.

Investments in private equity and hedge funds – 2.6% of assets under management – produced a combined return of 1.7%.

The pension fund reported a loss of 0.1% on its currency hedge, as a result of a slightly weakening euro against the Japanese yen and the Australian dollar.

Over the first quarter, the pension fund saw its coverage ratio increase by 7.6 percentage points to 135.8%. However, this was chiefly due to an additional contribution of €879m by the employer following the agreed financial independence of its scheme, closed for new entrants on 1 January 2014.

Currently, it has 72,775 participants.

New pensions accrual will take place in two new pension funds, providing collective defined contribution arrangements.

A new ING CDC Pensioenfonds will provide pensions for staff of ING Bank and Westland-Utrecht Bank, while NN CDC Pensioenfonds will manage the pension plan for staff at ING Insurances and ING Investment Management.

The two new schemes come in anticipation of the planned split of ING into a banking company and an insurance and investment firm – ordered by the European Commission due to the financial support ING received from the Dutch government during the financial crisis.