News / Pension financing struggles under the low interest rates

Pension financing struggles under the low interest rates

The fact that low interest rates lead to sustainable economic growth is obviously positive for the pension financing. But the lower economic growth prospects are blocking this effect. ‘We are approaching an alarming situation,’ warns Philip Neyt of PensioPlus.

‘Trade wars, globalisation and other labour market trends are putting our pension financing under tremendous pressure,’ says Philip Neyt, chairman of PensioPlus, the umbrella organisation of the institutions for occupational pension provision and the organisers of a sectoral pension plan. ‘Link this to the aging population and you get an alarming situation.’

In addition, the pension funds are being confronted with a double setback: the low interest rates are resulting in high pension obligations, while investments in low-interest-rate assets, such as bonds, lower the interest rates even further. This creates a vicious circle, warns Philip Neyt. ‘This negative spiral also slows down the investments in the real economy, resulting in reduced economic growth.’

This negative spiral is maintained, or even reinforced, by the heavy buffer requirements that institutional investors have to keep. Philip Neyt: ‘I call this a rigid short-term policy, which conflicts with another policy trends: taking the pension later as a result of longer career paths.’ Not only the private investor is hoarding too much on saving accounts today, but also the institutional investor is leaning towards this strategy, partially under pressure of the regulations and the (European) policy that works procyclical. This vicious circle should be broken sooner rather than later, says Philip Neyt. ‘This only leads to the diminishment of our fiduciary duty to guarantee a decent pension.’

Picture: ©Jonas Lampens

More news

Trends in the fund world: sustainable, passive and digital

Trends in the fund world: sustainable, passive and digital

Sustainability is increasingly higher on the agenda for investors, passive investing is gaining importance, and asset management is becoming increasingly more digital – these are the themes to help to determine and steer the fund market today. Theme 1: ESG Sustainability is everywhere Sustainability has become an important parameter on both the demand supply sides…

Read more
FIF 2020: Behind the Scenes

FIF 2020: Behind the Scenes

‘A digital approach means time gains for all’ The corona crisis forced the organisers of the Fund Insider Forum into another approach. Hans De Rore, Chief Commercial Officer at Mediafin talks about the challenges of a digital event with live keynotes and webinars. A physical event offers a full experience. How do you turn an…

Read more
Klaus Kaldemorgen:  How to diversify Risk in Multi Asset in a world of rising rates

Klaus Kaldemorgen: How to diversify Risk in Multi Asset in a world of rising rates

Klaus Kaldemorgen, Star fund manager (DWS) will be giving a keynote on how to diversify risk in multi asset, while an entire asset class has almost disappeared.  Klaus Kaldemorgen, a seasoned portfolio manager in the area of Multi Asset, will share his approach to managing a Total Return portfolio with a well defined risk profile in current market conditions.…

Read more

Fund Insiders Forum uses cookies. Read our cookies policy.