Funding ratio increases as a result of positive equity returns and life expectancy figures

16 December 2020

The current funding ratio increased in November from 108.2% (end of October) to 116.2% (end of November), or 8 percentage points. This sharp increase in one month is mainly the result of good returns on the equity portfolio and the processing of new figures on life expectancy.

Developments in financial markets

In November, Philips Pensioenfonds achieved good returns on its investment portfolio. The reports of vaccines against the corona virus caused investors to see a light at the end of the tunnel. This led to a positive mood on financial markets. But other investment categories also showed good returns. Due to the strong rise in the equity markets and the interest rate development, the funding ratio has increased by approximately 5%.

New figures on life expectancy

At the end of November, new life expectancy figures were incorporated into the funding ratio of Philips Pensioenfonds. This had a positive effect of about 3 percentage points. Average life expectancy is an important factor for pension funds to determine how much pension should be paid out in the future. Every two years, new life expectancy data is published that pension funds use to calculate their funding ratio.

Policy funding ratio remains stable at around 110%

The policy funding ratio has been around the level of 110% since the end of June. The policy funding ratio reflects the average of the current funding ratios over the past 12 months and therefore moves less rapidly with returns. The sharp rise in the current funding ratio in November had a limited effect on the policy funding ratio. The policy funding ratio was 109.8% at the end of November (end of October: 109.7%). This funding ratio determines whether and, if so, how much can be indexed. Legally, indexation is not permitted below 110%.