Funding level Q2 2013: 101.3%
Key points
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The funding level on 30 June 2013 was 101.3%.
On 31 March the funding level was 106.0%
In the second quarter, pension liabilities rose by 54 million,
from 5,542 million to 5,596 million euros.
Pension assets decreased by 194 million euros, from 5,860
million to 5,666 million euros, in the second quarter.
The return on the invested pension capital was -2.7% in the
second quarter.
The funding level is an important
measure of a pension fund's
financial situation. It indicates to
what extent the fund's assets are
sufficient to meet future pension
liabilities. In other words, does
the fund have enough money to
pay out all pensions, now and in
the future?
If the funding level is 100%, this
means that all (nominal) liabilities
can be exactly met. However,
this is just a snapshot of the
situation at a given moment. To
be able to cope with any
setbacks, a higher funding level
is necessary. Reserves are
needed also to be able to grant
supplements (indexation). If the
fund’s financial situation permits
this, the board grants
supplements in line with price
rises (pensioners and sleepers)
and general wage developments
(active members). Without
supplements, the pension would
lose much of its purchasing
power over time.
In the second quarter of 2013, PDN’s pension assets decreased by 194 million euros. This was to be
attributed mainly to the poor performance of all investment categories. Bonds and interest derivatives
in particular lost value because the market interest rate rose.
Pension liabilities increased by 53 million euros in the second quarter. This was caused mainly by a
slight decrease in the interest rate that the pension fund must use according to De Nederlandsche
Bank (DNB) to calculate its liabilities. This rate is an average of the market interest rate in the past
three months. The increase in the market rate in June therefore has a delayed effect on the calculated
pension liabilities, so that these still rose in the second quarter.
The funding level at the end of June was below the level of the minimum required capital, which is
104.3%. According to the recovery plan agreed with De Nederlandsche Bank, the funding level at
year-end must be at least 104.3%. If it is lower, the fund will have to announce and implement cuts to
pensions in payment and accrued pension entitlements.