NETHERLANDS - Stichting Pensioenfonds ABP recorded a return of 13.5% (€28bn) in 2010, its fourth highest figure since the Government lifted investment restrictions on the scheme 18 years ago.
ABP said virtually all asset classes made a positive contribution to its returns over the year, with emerging market equities yielding 26.6%, developed market equities 14.5%, corporate bonds 8.1%, private equity and real estate 29.6% and 16.8% respectively and government bonds 1.8%.
However, despite the double-digit returns the fund said volatile interest rates which the fund is required to use to value the current and future pension benefits had a dramatic effect on its coverage ratio.
The coverage ratio was 105% at the end of 2010, above the minimum requirement and higher than at the end of 2009 (104%). However, the coverage ratio fluctuated widely throughout the year due to the highly volatile interest rate. At the end of 2010 the coverage ratio was nine percentage points above the level specified in ABP's recovery plan.
At the end of April 2011 the coverage ratio was 111%, six percentage points higher than at the end of 2010. The movements in the coverage ratio during the first four months of this year once again reveal that the level is largely determined by the interest rate, ABP said. The pension liabilities were valued at €218bn ($312bn), whilst the assets increased to €242bn.
At the end of November 2010, the ABP Board decided an increase in pensions from January 2011 - in line with the growth in wages in the government and education sectors - would not be feasible.
Vice chair Xander den Uyl said: "The financial position at the time was inadequate for an increase. Since the coverage ratio was below 104%, ABP was unable to implement indexation - which hurt."
ABP was forced to record a substantial increase in the liabilities in 2009 due to the increased life expectancy. A further - albeit much lower - increase was revealed by the Statistics Netherlands' forecasts published in 2010.
Since the Statistics Netherlands' forecasts ABP uses in all its calculations only became available at the end of 2010, when the ABP Board announced it would make its decision on the increase in premiums, due to be implemented on 1 April 2011, at a later date.
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