The current low-interest rate environment and the QE policy of the ECB put severe pressure on both Defined Benefit and Defined Contribution pensions funds.
While PensionsEurope does not question the ECB monetary policy as such, it warns against the damaging impact of Quantitative Easing (QE) on pension funds and European pensioners. PE therefore calls the national and European regulators to consider this issue. PensionsEurope also provides recommendations in order to find an adequate balance between the short/medium term challenging environment and the sustainability of pension promises.
PensionsEurope calls upon regulators to address the specific effects of both low interest rate environment and Quantitative Easing policies on pension funds. However, we do not question QE policy as such. Decreasing interest rates can put funding ratios of Defined Benefit (DB) schemes under pressure and increase the price of annuities for both DB and Defined Contributions (DC) schemes. This can mean lower pension benefits and/or increase in contributions. Pension funds are by their nature long term investors due to the duration of their liabilities, but are now faced with the effects of short term QE.
Although PensionsEurope acknowledges that economic growth is crucial for Europe and has no position on whether QE is good or bad policy, pension funds cannot be just seen as ‘collateral damage’ of QE as this concerns pension provision for millions of Europeans.
Full position paper
© PensionsEurope
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