Renteval press pension in red – Financieele Dagblad (Registration)

The largest pension funds in the Netherlands are considerably weakened by the fall in interest rates in recent months. Officials Pensioenfonds ABP, PFZW Care Fund and the metal funds PME and PMT currently not even sufficient cash resources to meet their pension obligations. Their current coverage was late March lower than 100%.

This is evident from the quarterly reports that publish the largest pension funds today. The low coverage rates, the probability that the participants get their pensions increased with inflation temporarily nil. However, they need not fear for discounts. New rules have since this year less likely to be reduced.

ECB culprit

The big funds are unanimous about the cause of their deteriorating financial position: the aggressive policy of the European Central Bank (ECB ). “The ECB’s program is good for exports, but packed very bad for our pensions,” said Corien Wortmann-Kool, president of ABP.

The interest in Europe has long been extremely low, but decided in January since the ECB to buy on a monthly € 60 billion in debt to stimulate the economy, which got into a nosedive.

Germany benchmark

De German ten-year rate, which serves as a benchmark for global bond markets, interest rates Thursday dropped below 0.1% – the lowest level ever. It seems a matter of days before the German rate dips below zero and becomes negative. The Dutch ten year rate is sticking above the German, but is also only 0.22%.

For pension is in fact the long thirty-year rates important than the ten-year. But even that is extremely low. Germany is still only 0.5% and 0.6% for the Netherlands. For comparison, a year ago it was 2.5%.

Highly dependent

The German ten-year rate is about to be negative, a historical novelty. Driven by the bond purchase program of the European Central Bank (ECB) interest Thursday fell below 0.1%. Also, other European rates, with the exception of the Greek, are extremely low. That drives stock prices and real estate prices but brings pension funds and insurers in trouble.

Pension funds are due to their long term obligations very dependent on the interest rate. A decrease in interest rates translates directly into a deterioration of coverage, how good the returns are. The liabilities rose namely harder than ability.

New measures

“The ever decreasing interest rates increases the likelihood of the need for new measures next year. Our members and pensioners threaten as the victim to be the interest rate policy of the ECB, “French states Willem Briët, President of PME, which already has twice had to make a reduction of pensions.

Ook Peter Borgdorff, director of Care Fund PFZW says he very concerned about the impact it may have forced low interest rates in the longer term. Pension Building was the only one of the five largest funds in late March not underfunded.

Life insurers also problems

Not only pension funds but also life insurers are likely to get into trouble. The International Monetary Fund (IMF) warned this week that the low interest a large and growing danger “is the solvency of European life insurers. The IMF fears that even bankruptcies of life insurers threaten stability in Europe.