The possessions are mostly the invested contributions of the participants. The liabilities are the capital that the fund must have to be able to pay the pensions of all the participants now and in the future. If the funding ratio is 100%, a pension fund has just enough capital to be able to pay all the pensions. There is a deficit is the funding ratio is lower. If the ratio is higher than 100%, there is a surplus.
Differences between Belgium and the Netherlands
Before looking at the funding ratios of the three sections of the DEPF, we have to realize there are different rules for the DEPF sections. The scope of this article is too general to go into all the details, but we aim for higher funding ratios for the Dutch sections as we have to create buffers for future indexation.
Immediate extra contribution in Belgium
As Belgian participants usually have their pension paid out in the form of a lump sum at the retirement date, a buffer is not necessary. In this section we aim for a minimum funding ratio of 100%. Measures must be taken if the funding ratio drops below this level, for instance, in the form of an additional contribution. That was the case for DuPont Belgium at the end of 2018 (see the article about the annual report).
Recovery in first quarter 2019
The funding ratio of the three sections of the DEPF had decreased substantially at the end of 2018 compared to the level of a year ago due to the negative developments in the international financial markets. All pension funds were hit by these. As a result, the value of the investments depreciated. Fortunately, there was a distinct recovery in the first quarter of 2019, as appears from the graph below.
|Funding ratio in % of the DEPF sections||End December 2018||End March 2019|
Of course, results obtained in the past do not offer guarantees for the future. Changes in the financial markets and fluctuations of the interest rate can influence the results considerably. The DEPF board is closely monitoring all developments.