Impact of coronavirus on funding ratio and pension

The coronavirus is affecting the world economy. And this, in turn, is having an impact on NN CDC Pensioenfonds’ funding ratio. We understand that participants are concerned about the impact the coronavirus may have on their pension. We are monitoring the latest developments closely and will keep you informed in the weeks ahead, for instance by means of news items.

The international financial markets have been in turmoil over the past weeks. The volatile situation was largely driven by uncertainty regarding the coronavirus and its impact on the world economy (risk of a recession). Stock markets have plummeted and market interest rates, which were already extremely low, have come down even further. This has already had an impact on the pension fund's funding ratio as at 29 February 2020.

4% decline
The downfall of stock market rates have caused the value of the pension fund's assets to decline. At the same time, our commitments have increased. As a result, our funding ratio as at 29 February dropped to 99%, a 4% decline from the funding ratio at 31 January 2020. The funding ratio indicates whether the pension fund’s financial position on a certain reference date is adequate enough to pay out pensions accrued now and in the future. The higher the funding ratio, the better the pension fund’s financial position. A funding ratio of 100% indicates that the fund’s financial position on the reference date is adequate enough to pay out pensions that have been built up in the fund. Click here for more information on the funding ratio.

Long-term investment policy
NN CDC Pensioenfonds has in place an investment policy with a long-term horizon. While part of your eventual pension benefits will be paid from contributions paid into the pension fund, the largest part will be funded from return on the pension fund's investments. To ensure that there will be sufficient return, NN CDC Pensioenfonds has in place a prudent investment policy, under which all risks are carefully weighed.

Short-term impact of the coronavirus
NN CDC Pensioenfonds expects that the impact of the coronavirus will extend beyond the funding ratio for February. After all, the financial markets continued to be extremely volatile in the first two weeks of March, causing a further decline of our funding ratio. It is likely that our funding ratio will stay under pressure for some time yet.

More information
It goes without saying that the pension fund is closely monitoring developments. If you wish to stay up-to-date, check out the news items and quarterly updates on the pension fund's website. Every month, we publish an update on the funding ratio on the website.