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

Watch the webinars

Watch the webinars

FIF2020 might be over, but you can now watch the webinars given by Lazard, NN IP and BNP AM. Watch the video from NN IP here: NL: https://lnkd.in/gb9tbGyFR: https://lnkd.in/gEXqEuC Watch the video of BNP AM here:NL: https://lnkd.in/gb9tbGyFR: https://lnkd.in/gEXqEuC Watch the video of Lazard here: NL: https://lnkd.in/gb9tbGyFR: https://lnkd.in/gEXqEuC

Read more
Challenges in the Belgian Fund Industry – Johan Lema

Challenges in the Belgian Fund Industry – Johan Lema

01.10.2020 – 13.00 Johan Lema has been working for KBC since 1996. At the present time he is CEO at KBC Asset Management Next to that he is also president of BEAMA (Belgian Asset Managers Association) Want to hear Johan’s idea of the challenges in de Belgian fund industry? Join the webinar on the 1st…

Read more
‘New regulations are good news for the funds market’

‘New regulations are good news for the funds market’

The new Code for Companies and Associations is causing a (r)evolution in the Belgian legal system. The simplification and flexibilisation of company law also affects funds that are organised in the form of a Belgian company. On May 1st 2019, the new company law came into effect. Since then, it is no longer possible to…

Read more

Fund Insiders Forum uses cookies. Read our cookies policy.