What's the current status of the funding ratio?
Regardless of whether you're currently employed by NN or you've left the company or retired, the pension fund's funding ratio affects your pension. That's why it's an important indicator to keep an eye on. This article gives you an update.
The pension fund's funding ratio is a measure of its financial position. If the funding ratio is 100%, the pension fund has exactly enough cash to pay out its pension commitments. The higher the funding ratio, the better the pension fund’s financial position.
Impact of interest rates
The funding ratio is the ratio between the pension fund’s assets (investments) and its commitments. In addition to return on the fund’s investments, interest rates have an impact on its result as well. When interest rates decline, the funding ratio declines too. When interest rates rise, the funding ratio grows and the pension fund's financial position improves.
Funding ratio developments
In 2019 and 2020 interest rates were extremely low. As a result, NN CDC Pensioenfonds’ funding ratio dropped. The pension fund's policy funding ratio, which is equivalent to its average funding ratio for the preceding 12 months, declined during that period as well.
In the first months of 2021, the funding ratio rose due to the combined effect of rising interest rates and stock market prices. The funding ratio would have been higher if the long-term interest rate that pension funds in the Netherlands are required by law to apply (also referred as the ‘DNB Ultimate Forward Rate’) had not been adjusted with effect from 1 January 2021. The adjustment had a negative impact of around 2.6% on the funding ratio.
Development funding ratios
In the same period, stock market prices rose as a result of the successful roll-out of coronavirus vaccines in the United States and the United Kingdom, and the Democrats winning the elections.
What you can do
If you want to stay up-to-date on the financial situation of NN CDC Pensioenfonds and how it affects your pension, check the website for news and quarterly updates on funding ratios, investment results and developments in the financial markets.