Ortec Finance: Pension funds set to increase contributions

Ortec Finance: Pension funds set to increase contributions

20 februari 2025

Risicomanagement Pensioenfondsen
Pensioen sparen (pixabay - Megan_Rexazin_Conde).jpg

Despite around two thirds (65%) of pension fund executives saying their funded status has improved over the past year, including 5% who say it has improved dramatically, almost three-quarters (74%) say they will or are likely to increase contributions this year according to a new survey from Ortec Finance.

The survey, which targeted senior pension fund executives in the UK, US, the Netherlands, Canada and the Nordics whose funds collectively manage $1.451 trillion in assets, also found that almost three-quarters (73%) will increase their budget for and focus on scenario modelling, asset-liability management, and stress testing over the next two years. That includes 20% planning to increase their budget for and focus on the issues dramatically.

Around a third (32%) of those surveyed say the fund they work for is already very effective at scenario modelling and stress-testing. Around two thirds (66%) say the fund they work for is quite effective and 2% say it’s not very effective. The majority of senior executives therefore see room for improvement.

Increased spending on scenario modeling comes as 77% of pension fund executives expect the coming year to bring an elevated risk profile, with 23% of these believing their risk profile will increase dramatically. Just under half (48%) of those surveyed said their risk profile increased slightly last year and 6% reported their risk increased considerably. Around two fifths (41%) reported their risk profile remained the same and only 5% said their risk decreased.

Managers see risks across the short and long term, with long-term liquidity risk being the larger concern for the pension fund managers questioned. Around 60% say it is the biggest risk faced by the funds they manage, while 25% say short-term liquidity is the biggest risk. Only 15% say the short and long-term risks are roughly equal.

The study found increasing exposure to private assets is part of the reason for liquidity concerns, particularly among defined benefit (DB) schemes.

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