International

The German regulator has piled further pressure on the European Central Bank over its low interest rate policy, which experts believe is wreaking havoc on pension schemes and savers in Europe’s largest economy.

BaFin, Germany’s financial services watchdog, said that pension schemes in Germany might soon be forced to cut benefits for retirees as a result of the low interest rate environment.

Alfred Gohdes, chief actuary in the Frankfurt office of Willis Towers Watson, the world’s largest adviser to institutional investors, described Bafin’s intervention as “unusual”.

He said: “In Germany only one pension fund has cut benefits previously. This happened more than 10 years ago. Now there is a strong possibility of benefits being cut in Germany if low rates continue. It is a slow poisoning [of the pension system].”

Bafin’s comments come just two weeks after the head of France’s largest public pension fund warned many retirement funds in Europe will “implode” if the ECB’s low interest rate policy continues.

ABP, Europe’s largest retirement fund, which provides pensions for one-sixth of the Dutch population, also said last month there is a “distinct possibility” of benefits being cut in 2017 due to declining interest rates.

Mario Draghi, president of the ECB, defended the central bank’s decision in April to keep its benchmark interest rate at zero. The deposit rate on lenders’ reserves held at the central bank have also been kept at -0.4 per cent.

At a press conference at the end of April he said: “It’s pretty evident that pension funds and insurance companies are significantly affected by the low level of interest rates.

The custodians of about US$180 billion in Swedish pensions are warning that savers in Scandinavia’s biggest economy may not yet have grasped how profound the effect of negative rates will be on their retirement buffers.

Eva Halvarsson, the chief executive officer of the US$37 billion AP2 fund, one of six that make up Sweden’s AP system, says the government may need to take some pro-active steps to prepare Swedes for the bad news. The guidance could be part of an evaluation slated to be delivered this month, she said.

«They have never commented on this issue in particular before, the interest rate situation, but I think they will do that now,» Ms Halvarsson said in an interview. The government needs to «prepare the market for the fact that we can probably not have as high expectations for the AP funds or other investors.»

  Straitstimes

The U.S. retirement landscape is starting to look like a Charles Dickens novel.

Since voluntary savings plans led by 401(k)s have largely replaced traditional pensions, it’s probably no surprise that this is the best of times for many highly paid workers. Equally unsurprising is that this is the worst of times for almost everyone else, especially the 42 percent (PDF) of workers who don’t have access to a work-sponsored plan. The stunner is just how much the luckiest among us will outpace the unluckiest on retirement day: eleven times as much.

A new report from the Government Accountability Office describes this tale of two Americas. It calculates the effect that unequal pay and limited access to retirement plans will have on today’s workers decades from now. It also offers a few suggestions for how Americans might boost their retirement income.

About 60 percent of all U.S. households have no savings in an individual retirement account (IRA) or in a 401(k)-style account,¹ the report found.  

  Bloomberg

Während in der Schweiz von linker Seite die berufliche Vorsorge neuerdings systematisch schlecht geredet wird, sehen die deutschen Sozialdemokraten hier die Zukunft der Altersvorsorge. In der Welt heisst es dazu:

Nun hat sich die amtierende Arbeitsministerin Andrea Nahles (SPD) des Themas angenommen.

In den Firmen sollen staatlich animiert Lösungen zwischen Arbeitgebern und Gewerkschaften gefunden werden. Noch 2016, am besten bis zum Sommer, will sie ihr Modell vorstellen – die Nahles-Rente. Schließlich hat vor allem die SPD die Rente als Wahlkampfthema entdeckt. Wer 2017 vor seine Wähler tritt, steht besser da, wenn er Initiativen gegen eine deutsche Urangst, die Altersarmut, präsentieren kann.

Der Ruf der Rente ist so schlecht wie nie. Den gesetzlichen Zweig nimmt seit Jahren niemand mehr ernst. Als echter Schutz vor der Armut im Alter taugt er in den Augen der Mehrheit nicht. Auch der Ruf der privaten Vorsorge hat zuletzt gelitten. Die Riester-Rente – einst der große Hoffnungsträger – gilt inzwischen als gescheiterte Idee. Jetzt plant die Politik die nächste große Reform. Eine flächendeckende betriebliche Altersvorsorge soll es richten. Und die muss gelingen. Die Politik weiß: Sie hat nur diesen einen Versuch. Doch die strukturellen Grundprobleme, das ist jetzt schon klar, wird auch dieses Konzept nicht beheben können.

Japanese families seem to have a sudden affinity for home safes. According to the Tokyo-based manufacturer Eiko, shipments have doubled since last fall. And in Germany, insurer Munich Re has stashed some 10 million euros ($11.4 million) worth of its own cash into vaults.

Why the squirreling? One possible reason is the creeping imposition of negative interest rates across the world, which could make it more rewarding to bypass banks—and a safe or vault is, well, more secure than a mattress.

Welcome to the upside-down world of modern monetary policy. In this new reality, borrowers get paid and savers penalized. Almost 500 million people in a quarter of the global economy now live in countries where interest rates measure less than zero. That would’ve been an almost unthinkable phenomenon before the 2008 financial crisis, and one major economies didn’t seriously consider until two years ago, when the European Central Bank first partook in the experiment. Now the ECB and the Bank of Japan are diving deeper into the sub-zero world as they seek more ways to spark inflation.

  Bloomberg

Ireland’s pension regulator wants to cut the number of corporate retirement plans in the country from 150,000 to 100 in a move that would put pressure on pension providers and asset managers to reduce fees.

Brendan Kennedy, pensions regulator at the Irish Pensions Authority, a watchdog, said Ireland’s €90bn corporate pension system needs to be overhauled to make it more “member centred and more efficient”.

  ft