Funding ratios, which measure the amount of liabilities that available assets cover in defined benefit (DB) pension plans, have evolved differently over the years across countries but tended to improve over the last decade in most cases. The growth of assets in DB plans, visible in most reporting countries, supported the improvement in funding ratios, as well as the recent rise in interest rates when liabilities are valued using market-based discount rates. Funding levels of DB plans were above 100% at the end of 2024 (or latest available date) in all reporting countries but four: Iceland, Mexico, the United States among OECD countries, and Indonesia. Funding levels are calculated using national (regulatory) valuation methodologies of liabilities that differ across countries and affect the comparability across countries.
Pensions at a Glance 2025
Funding ratios of DB plans, which measure the amount of liabilities that available assets cover, have evolved differently over the years across countries, but tended to improve in most of them. Among the 12 reporting countries, 7 recorded a stronger funding ratio at the end of 2024 than a decade or so before, with the largest improvement occurring in Ireland (33 percentage points more between end‑2015 and end‑2023), the United Kingdom (26 percentage points more between end‑2014 and end‑2024) and the United States (17 percentage points more between end‑2014 and end‑2024) (Figure 9.6). The funding ratio of DB plans also improved but to a lesser extent in Finland, the Netherlands, Norway and Switzerland. In Germany, the funding ratio is slightly lower at end‑2024 (119.5%) than at end‑2014 (119.7%). The funding ratio dropped the most in Iceland, but this drop reflects the conversion of a DB scheme for civil servants (more funded than others) into a DC scheme and therefore not included in the calculation of the funding ratio aggregated at the national level any longer.
The growth of assets in DB plans, visible in most reporting countries, supported the improvement in funding ratios. DB plans may have also benefitted from the recent rise of interest rates, when liabilities are valued using market-based discount rates.
Funding levels are calculated using national (regulatory) valuation methodologies of liabilities. Some countries use fixed discount rates like Finland (at 3%) and Iceland (3.5% real), while others like the Netherlands and the United Kingdom use market rates as a discount rate. In the Netherlands, pension funds can use an Ultimate Forward Rate (UFR) for the valuation of liabilities. The UFR is an extrapolation of the observable term structure to take into account the very long duration of pension liabilities. The Pension Protection Fund in the United Kingdom uses conventional and index-linked gilt yields to calculate the liabilities of the DB plans in the scope of its index (PPF 7 800). The choice of the discount rate that is used to express in today’s terms the stream of future benefit payments can have a major impact on funding levels. Changes in interest rates affect the value of the liabilities in countries using a market-based discount rate while the impact is minimal on those using a fixed discount rate.
Funding levels of DB plans were above 100% at the end of 2024 (or latest available year) in all reporting countries but four: Iceland (26%), Mexico (65%) and the United States (74%) among OECD countries, and Indonesia (96%). The funding levels vary across DB plans, such as in the United States where corporate pension plans have higher funding ratios than public pension plans.
Definition and measurement
The funding position of DB plans is assessed in this publication as the ratio between investments and technical provisions (net of reinsurance) of all DB plans aggregated at the national level. Investments of DB plans may be a low estimate of assets of DB plans as they would not include receivables and claims against the plan sponsor to cover the funding shortfall. Technical provisions represent the amount that needs to be held to pay the actuarial valuation of benefits that members are entitled to. This is the minimum obligation (liability) for all DB pension plans.
Liabilities are estimated using country-specific methodologies. Methodologies differ across countries with respect to the formula used, the discount rate (e.g. a market discount rate, or a fixed discount rate), or the way future salaries are accounted for (e.g. liabilities can be based on current salaries or on salaries projected to the future date that participants are expected to retire) for example. As a result, funding ratios cannot be compared across countries.
The evolution of the number of DB plans for which the aggregated funding ratio is calculated may influence the trends. In Iceland, the funding ratio dropped between 2016 and 2017 as a public-sector scheme for state and municipal employees (one of the most highly funded) was converted into a DC plan and therefore not included anymore in the aggregated funding ratio from 2017 onwards.
Further reading
OECD (2020), OECD Pensions Outlook 2020, OECD Publishing, Paris, https://doi.org/10.1787/67ede41b-en.
Note: LHS: left-hand side axis. RHS: right-hand side axis. The funding ratio has been calculated as the ratio of total investment and net technical provisions for occupational DB plans managed by pension funds using values reported by national authorities in an OECD questionnaire. Data for Finland refer to DB plans in pension funds only. All liabilities of DB plans (instead of technical provisions only) are considered for Ireland, Mexico (occupational DB plans in pension funds only) and the United States. Data for Luxembourg refer to DB traditional plans under the supervision of the CSSF. Data for the Netherlands and Switzerland include all types of pension funds. Data for the United Kingdom come from the Purple Book published by the Pension Protection Fund and show assets, liabilities valued on an s179 basis (instead of net technical provisions) and the ratio of the two. Data for Indonesia refer to EPF DB funds and come from OJK Pension Fund Statistics reports before 2016.
Source: OECD Global Pension Statistics.