The coverage ratio represents the ratio of a pension fund’s assets to its liabilities, expressed as a percentage. The coverage ratio indicates the extent to which the DB pension obligations can be met. The green line in the graph below shows the current coverage ratio. Regulator DNB requires pension funds to calculate their coverage ratio according to the average of the twelve previous current coverage ratios. This is called the policy coverage ratio. It is represented by the blue line. Pursuant to the Pensions Act, the policy coverage ratio is leading for the policy pursued by the SPIN board.
Funding ratio and policy funding ratio trends
The current funding ratio (green line) increased slightly in December compared to November from 130.6% to 130.8. The policy coverage ratio (blue line) remained the same at 129.1%. The policy funding ratio is an average of the 12 previous current funding ratios.
Technical Provisions
Technical provisions consist of a pot of money that must be maintained at this time to meet all future benefits. The amount of the provisions is determined by the market interest rate. The lower the market interest rate, the more money we have to hold.
Funding ratio and policy funding ratio
The coverage ratio represents the ratio of a pension fund’s assets to its liabilities, expressed as a percentage. The coverage ratio indicates the extent to which the pension obligations can be met. The green line shows the current coverage ratio. Regulator DNB requires pension funds to calculate their coverage ratio according to the average of the twelve previous current coverage ratios. This is called the policy coverage ratio. It is represented by the blue line. Under the Pensions Act, the policy coverage ratio is the guiding principle for the policy pursued by the SPIN board.
Required coverage ratio
The black line is the required funding ratio. If the policy funding ratio falls below the required funding ratio, there is a funding shortfall. If there is a funding shortfall for five years in a row, SPIN may have to reduce pensions. The chart above shows how well SPIN is above the required funding ratio.