The economic funding ratio is a funding ratio pursuant to Art. 44 BVV 2 and indicates the proportion of a pension fund’s liabilities that are covered by assets. In contrast to the actuarial funding ratio, the liabilities are valued on the basis of financial-economic principles. This includes, in particular, the risk-adjusted valuation of future cash flows (near-market valuation based on a replication portfolio) as well as the use of best estimate assumptions.

Nominal fixed pension payments are discounted with the interest rates of government bonds that are in line with maturities and a best estimate of the increase in life expectancy is used (generation tables). This is in contrast to the actuarial funding ratio, where the guaranteed pension payments are discounted with a technical interest rate and for which period tables based on past mortality are often used. The technical interest rate is determined by the supreme body of the pension fund on the recommendation of the expert and is generally based on the expected return (minus margin) of the investment structure as well as the structure and characteristics of the pension fund.

The economic funding ratio provides more meaningful information on the actual financial situation of the pension fund than the actuarial funding ratio. Due to the uniform valuation of assets and liabilities, the economic funding ratio is a key indicator for the risk management of a pension fund.