Low interest downer for pension funds: hope money press Draghi – z24

Low interest downer for pension funds: hope money press Draghi – z24

Photo ANP

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Pension funds should pray that the printing press of the European Central Bank provides higher inflation and thus over time for higher interest rates. For extremely low interest rates affecting the financial position of Dutch pension funds

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The financial position of the large pension funds is still under pressure. Four of the five largest funds had late 2014 underfunding. Only Fund bpfBouw is in good shape and increases pensions January 1, according to Friday published quarterly figures.

On Friday, the five major pension funds their coverage ratios known, which demonstrate how they meet their payment obligations. A coverage ratio of 100 percent means that a pension fund for every euro of capital also has a euro payment obligations. A coverage ratio of less than 100 percent means that less than 1 euro assets for every dollar of benefit obligations. Regulator De Nederlandsche Bank (DNB) requires minimal coverage ridge of 104 percent.

Low interest press pension

The low interest rate environment causes many funds, despite increased capacity, insufficient cash resources have to pay the pensions in the long term.

A low interest rate means that the burden of the pension heavier on the pension repressed because that

future proceeds from bond investments this may be lower. The positive development of the Belgian went returns in the short term is often insufficient to compensate for the effects of low interest rates.

Pension funds must therefore hope that the decision of the European Central Bank (ECB) on government bonds on buy and inject fresh money will help the economy to boost inflation. Then after all, interest rates go up again.

ABP is in the danger zone

ABP, the largest pension fund in the Netherlands, saw its funding reduced by 2 percentage points to 101.1 percent. This is well below the minimum limit of 104 percent fat. ,, For the full year, we added a record amount of over 43 billion euros to the pension pot. However, the coverage has declined. We now need to take any measures which the participants, but the expected development of the funding in 2015. worries us, “told ABP vice chairman Cees Feather

The funding of pension Care & amp.; Welfare (PFZW) decreased from 105 to 102 percent. The metal PMT and PME funds saw their funding ratios also lower. Of PME declined slightly from 102.6 percent to 102 percent. PMT amounted to 103 percent.

bpfBouw has enough fat on the bones

Positive exception is bpfBouw with a coverage ratio of 114.5 percent, or 0.7 percentage points higher than the end of September . The Fund increases pensions by 0.15 to 0.20 percent. The other funds moreover do not shorten. That’s because the industry to make this year get new rules and 2015 is seen as a transition year.

As of this year, the pension sector must calculate the coverage in a different way, namely by looking at the average over the past twelve months. This is one of the measures of the government to make pensions more stable.

As long as interest rates remain low in 2015 will probably see a downward trend in coverage ratios remain expects the Pension Federation, an umbrella organization of the funds.

Source: Reuters / Z24