Assets under management by pension funds in the Netherlands 2011-2020
Financial health of pension funds is important to the Netherlands
Simply put, the Dutch pension system forces citizens to set money aside for later. The reliance on pension funds does mean, however, that authorities must keep a close eye that the funds have enough financial reserves to actually pay the retirees. An important way of measuring this is the so-called policy funding ratio (in Dutch: dekkingsgraad), which compares the assets from a pension fund against its liabilities. Should the index (which is based on the last 12 months) reach 100 percent, the fund is able to pay all the pensions. Should the ratio become too low, however, funds are forced to cut in their pay-outs. From 2020, the ratio all pension funds have to reach is set at 104 percent.
Pension funds rank among the highest investors
As all employees participate, Dutch pension funds have a lot of money to invest with. In 2020, total investments amounted to approximately 2.1 trillion U.S. dollars. The funds are free to choose what projects to invest in: this can range from mortgages to infrastructure projects to economic projects within the Netherlands or prospects in other countries. For example, the investments from Dutch pension funds in hedge funds reached a value of 25.1 billion euros in the third quarter of 2021.