Ortec Finance: Pension funds report possibility of increasing contributions in coming year despite improving funding status

Ortec Finance: Pension funds report possibility of increasing contributions in coming year despite improving funding status

18 december 2024

Pensioenfondsen
Pensioen (06)

Pension funds have experienced an improvement in their funded status over the last year. However, despite the improvement of assets over liabilities, the majority of plans surveyed say they are likely to increase contributions this year, according to a survey from Ortec Finance. 

The survey, executed by independent research company PureProfile, targeted senior pension fund executives in the UK, US, the Netherlands, Canada and the Nordics whose funds collectively manage $1.451 trillion in assets.

Around 65% of pension fund managers surveyed say their funded status has improved over the past year including 5% who say it has improved dramatically. Just over a quarter (27%) say their funded status is unchanged over the past 12 months while 8% say it has deteriorated.

However, the pension plan managers questioned say there is a possibility they will increase contributions and bolster their assets for the coming year. Only 6% of plan managers surveyed reported that they definitely will not increase contributions, suggesting that many feel the need to leave open the option for improving the relative relationship between their assets and liabilities.

The survey suggests that despite improved funded status, plan managers could be skeptical about continued funded status improvements. More than one in ten (12%) say the pension fund they work for will definitely increase contributions this year. A further two-thirds (62%) say it’s likely that the pension fund they work for will increase contributions this year, and one in five (20%) say it might happen.

Marnix Engels, Managing Director Global Pension Risk at Ortec Finance breaks down the suggested skepticism of plan managers: “When it comes to the long-term health of a pension fund, an improved funded status in one year may not carry over to the long run health of the fund. Keeping the door open to increased contributions to sustain the relative value of assets over liabilities is reasonable. There are issues to consider in order to maintain this improvement in their funded status, particularly during periods of volatility, which is why it’s important to keep clear and detailed oversight of both the assets and liabilities of a fund.”

 

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