International

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

Japan’s government will escape a piece of bad news until after a summer election.

The $1.3 trillion Government Pension Investment Fund will on July 29 announce what may be its worst annual loss since the global financial crisis — about three weeks later than usual and after an upper house poll that must be held before July 25. SMBC Nikko Securities Inc. estimates the decline for the fiscal year ended March at as much as 6 trillion yen ($54 billion).

The world’s largest pension fund has been swept up in Prime Minister Shinzo Abe’s package of deflation-fighting policies known as Abenomics, with the premier backing a review of GPIF’s investment strategy that led to it putting half of its assets in equities. Abe has been criticized in parliament by opposition party lawmakers who say the public’s pension money is at risk of vanishing as stocks tumble.

  Bloomberg

C’est une grande première. Le projet de loi Sapin 2 présenté mercredi en conseil des ministres prévoit la création de fonds de pension à la française. Mais que les défenseurs de notre bon vieux régime de retraite par répartition se rassurent, la mention « à la française » garantit qu’il ne s’agit pas de vrais fonds de pension. Le projet de loi vise en fait à doter d’un régime juridique à part les produits d’épargne retraite professionnels, qui gèrent autour de 130 milliards d’euros.

 L’Agefi

78 Billionen Dollar. Diese unfassbare Summe soll nach einer Berechnung der Bank Citigroup in den Pensionsverpflichtungen der 20 größten OECD-Staaten fehlen. «Wenn man sich das Ausmaß der ungedeckten Pensionsverpflichtungen ansieht, ist es eine tickende Zeitbombe», sagt Charles Millard, einer der Autoren der Studie, der Financial Times.

Unglücklicherweise sei es eine Gefahr, die sich nur langsam anbahne und nie das Gefühl einer Krise wecke. «Die gute Nachricht ist, dass wir Zeit für Korrekturen haben. Die schlechte Nachricht ist, dass wir ohne eine Krise dazu tendieren, eher keine Korrekturen zu machen», sagt Millard.

Besonders gefährdet ist der Studie zufolge Europa, weil Staaten wie Deutschland oder Frankreich umfangreiche staatliche Rentensysteme haben. Die Citigroup hat in ihrer Studie errechnet, dass Deutschland, Frankreich, Italien, Großbritannien, Portugal und Spanien Lücken bei den Pensionsverpflichtungen haben, die wohl mehr als dreimal so hoch sind wie das Bruttoinlandsprodukt dieser Länder.

Die Bank stellt aber nicht nur eine verheerende Diagnose. Sie macht auch Vorschläge, wie das Problem gelöst werden könnte. So sollten die Regierungen das Rentenalter stärker an die längere Lebenserwartung der Menschen anpassen. Diese sei ein Hauptgrund für die Lücke in den Versorgungssystemen. Geht es nach den Autoren der Studie, sollten die staatlichen Renten nicht mehr das Haupteinkommen im Alter einbringen, sondern in Zukunft nicht mehr sein als ein «Sicherungsnetz».

  Süddeutsche

Some 7 million workers and pensioners may well see their pensions reduced next year. The financial situation of the large Dutch pension funds dropped to critical last month, according to figures released by Aon Hewitt.

A pension fund’s situation is considered critical when its coverage ratio drops below 90 percent. Civil servants pension fund ABP’s coverage ratio now stands at 88.2 percent. Healtcare’s PFZW is at 87 percent. Large metal works fund PME is at 89.2 percent, and small metal PMT is at 89.6 percent.

Of the large pension funds, only construction fund BPF Bouw is still holding on at a dangerous, if not critical coverage ratio of 102.4 percent. Dutch pension funds’ average coverage ratio fell to 94 percent in February. Research firm Aon Hewitt mainly attributes the drop to the ever-falling interest rates.

ABP chairman Corien Wortmann-Kool acknowledged to the newspaper that the low coverage ratio does increase the chance that pension funds will reduce next year. But she does not believe it “inevitable”. Much depends on what happens in the markets this year. “What is certain is that pensions will not go up in the next five years”, she said to the Volkskrant.

  NLTimes

Awareness of the impact of low interest rates and volatile markets on pension funds is nothing new, but the results of the first stress test on these investors by a European supervisory authority has made clear how acute the problem is.

The low-interest-rate environment has continued to take its toll on the liabilities side of pension fund balance sheets, and sources with knowledge of these institutional investors said no amount of investment would bring the assets up to a level necessary to tackle existing deficits.

The European Insurance and Occupational Pensions Authority’s stress test looked at a number of different scenarios for pension funds in European Union countries. But even before applying these stresses, it found that in the 17 tested countries, total liabilities outweigh assets by € 428 billion ($477.8 billion) under its common methodology. With a severe stress — an abrupt drop in interest rates and an increase in inflation rates — this shortfall would hit € 773 billion under EIOPA’s model.

It’s a problem evident across the globe: The latest report from Wilshire Consulting showed the aggregate funded status of U.S. corporate pension plans fell to 78.3% at the end of February, down 1.1 percentage points. That was largely driven by an increase in liabilities coupled with flat asset growth.