The current funding ratio fell in March from 109.8% (end of February) to 101.8% (end of March), or 8 percentage points. These funding ratio figures indicate that Philips Pensioenfonds is also suffering considerably from the corona crisis. The decrease in the current funding ratio is therefore mainly the result of developments in financial markets, which we will explain in more detail below. However, part of the decline has a completely different reason, which we certainly do not want to mention in these uncertain times: as of 1 April 2020, all pensions have been increased by 0.64%. As a result, our pension obligations have increased and the funding ratio has fallen by approximately 0.7 percentage point.
Developments in financial markets
In March we saw significant fluctuations in the current funding ratio as financial markets responded to developments regarding the corona virus. In the first half of March, it became clear that the virus was rapidly spreading in Europe and the United States. As a result, more and more restrictive measures were needed in social / economic traffic. Concerns about entering a recession increased. When governments and the European and American Central Bank announced in the second half of March to take stimulus measures to limit economic damage, the financial markets rebounded. The Fund follows all these developments and informs you monthly about their impact on our financial position.
Drop still visible to a limited extent in policy funding ratio
The sharp decline in the current funding ratio in March is reflected to a much lesser extent in the level of the policy funding ratio. This is because the policy funding ratio shows the average of the current funding ratio over the past 12 months. The policy funding ratio was 112.2% at the end of March.
If the consequences of the corona virus continue in the coming period, the policy funding ratio will also decrease further. The funding ratio determines, for example, the indexation and discount policy of Philips Pensioenfonds. The coming period will show how long the corona crisis is gripping the financial markets and when recovery will occur. As a pension fund, we keep a close eye on these developments.