In the fourth quarter, interest rates rose and equities achieved a positive return. This led to a strong improvement in our financial situation. Despite the rise in interest rates, interest rates remain very low. As a result, the outlook for 2020 is not very optimistic. Fortunately, we do not need to reduce pensions in 2020, as our policy coverage ratio was 103.3% as at 31 December 2019.
In our quarterly report published today, Chairman Ruud Degenhardt says about this: "We are ultimately at a better position at the end of 2019 than at the end of 2018, but we are not yet back at the level of two years ago. The interest rate is very low, despite the increase in the past few months. It is also substantially lower than at the end of last year. As a result, we have to add almost the entire investment return of 16% in 2019 to our reserves."
"We anticipate another difficult year, with continued low interest rates, uncertainty in the financial markets and stricter calculation rules for pension funds".
Policy funding ratio 31 December 2019: 103.3%
The financial situation of the past few months is reflected in the policy coverage ratio, which is a 12-month average. This coverage ratio decreased in the fourth quarter, from 104.1% on 30 September 2019 to 103.3% on 31 December 2019. On our website you can find more information about the development of the policy coverage ratio.
Current UFR funding ratio 31 December 2019: 105.4%
The current UFR coverage ratio rose strongly in the fourth quarter, from 98.3% to 105.4%. This concerns the so-called UFR coverage ratio, which is a snapshot of the position at the end of the month. On our website you can find more information about the development of the UFR coverage ratio.
Return on investments up to and including 31 December 2019: +16.0% (in the fourth quarter: +1.2%)
The total return on investments in 2019 was +16.0%. The investments to hedge the interest rate risk (Matching) showed a return of +11.7% in 2019. The investments to achieve an extra return (Return), such as equities, yielded a return of +19.0% in 2019.
Investment returns defined contribution schemes
The returns on our defined contribution schemes were positive in the fourth quarter and also showed a positive return over the full 2019 year: +17.9% for participants up to age 37; +17.2% for participants aged 38-47; +16.5% for participants aged 48-57; and +15.7% for participants aged 58-68.
Do you need more information? Please consult our quarterly report.