Key Takeaways
- • ING expects more than €900bn in Dutch pension assets to transition to the new framework in 2027, following roughly €600bn that already moved in 2026.
- • The reform shifts interest rate hedges from fund level to age cohort, with ABP's hedge at just 10% for younger participants and 75% for older ones, reducing demand for very long-dated (25+ year) fixed income.
- • ING expects limited immediate market impact in January because funding ratios are healthy, with record-high equities and higher swap rates keeping most funds well above the 105% threshold; ABP's ratio is above 130%.
- • The more lasting effect is more frequent swap rebalancing, since liabilities now track fund assets and move with global markets.
- • ING attributes roughly 20bp of the 10s30s steepening in 2025 to the reforms, while noting that 2026 flattening was driven mainly by hawkish ECB and Fed repricing.
Summary
ING research indicates that the largest wave of Dutch pension reform is still ahead, with more than €900bn in assets expected to transition in 2027. Dutch pension funds hold over €1.5tr in assets, and the reforms are moving the sector from a defined benefit framework toward a more defined contribution-like structure. Around €600bn has already transitioned in 2026.
Under the new system, interest rate hedges are set by age cohort rather than at the fund level. This reduces demand for longer-dated fixed income, because younger participants are only partly hedged; ABP's hedge for them is 10%, rising to 75% for older participants. Demand for hedges at maturities of 25 years and beyond is therefore expected to be relatively small. Participants near or in retirement will still require fixed income, often more than under the old system, but over much shorter maturities.
ING says the reforms contributed around 20bp to 10s30s curve steepening in 2025, though part of this was linked to speculative flows from other financial players. In 2026, the curve flattened mainly because of hawkish repricing by the European Central Bank and the Federal Reserve. ING sees structural scope for further 10s30s steepening from changing Dutch pension demand, but says this requires greater market confidence in the inflation outlook and a lower front end.
ING expects an orderly January transition with limited market impact. Record-high equity prices and higher swap rates keep funding ratios well above 105%, and higher equity prices reduce the need to unwind interest rate hedges, since hedging needs now depend on asset prices. Many funds transitioning in January 2026 had already completed hedging beforehand.
The shift to asset-based liabilities also means more frequent rebalancing. Liabilities were previously stable and reviewed only annually for inflation indexation. Now they move with fund assets. When equities rise, funds must add interest rate hedges. In theory this could generate large monthly swap flows, but ING expects funds to operate within narrow ranges around hedging targets, which should avoid sharp flows on every market move. Even so, ING anticipates more swap activity than under the old system.
Under the new system, interest rate hedges are set by age cohort rather than at the fund level. This reduces demand for longer-dated fixed income, because younger participants are only partly hedged; ABP's hedge for them is 10%, rising to 75% for older participants. Demand for hedges at maturities of 25 years and beyond is therefore expected to be relatively small. Participants near or in retirement will still require fixed income, often more than under the old system, but over much shorter maturities.
ING says the reforms contributed around 20bp to 10s30s curve steepening in 2025, though part of this was linked to speculative flows from other financial players. In 2026, the curve flattened mainly because of hawkish repricing by the European Central Bank and the Federal Reserve. ING sees structural scope for further 10s30s steepening from changing Dutch pension demand, but says this requires greater market confidence in the inflation outlook and a lower front end.
ING expects an orderly January transition with limited market impact. Record-high equity prices and higher swap rates keep funding ratios well above 105%, and higher equity prices reduce the need to unwind interest rate hedges, since hedging needs now depend on asset prices. Many funds transitioning in January 2026 had already completed hedging beforehand.
The shift to asset-based liabilities also means more frequent rebalancing. Liabilities were previously stable and reviewed only annually for inflation indexation. Now they move with fund assets. When equities rise, funds must add interest rate hedges. In theory this could generate large monthly swap flows, but ING expects funds to operate within narrow ranges around hedging targets, which should avoid sharp flows on every market move. Even so, ING anticipates more swap activity than under the old system.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.