Low Interest Rate Pension Problems Here to Stay
03 August 2012 (PLANSPONSOREurope.com) – Even if eurozone leaders can sort out the area's finances Dutch plan sponsors and pension funds will still have to contend with a low interest rate environment, Patrick Woods Investment Director Netherlands at Standard Life Investments has told PLANSPONSOR Europe.
This week European markets made their displeasure known as European Central Bank president Mario Draghi said the bank would come up with ways to assist struggling eurozone countries "over the coming weeks". Turbulent markets have wrought havoc for interest rates across the continent.
Woods told PLANSPONSOR Europe: “The ideal scenario for a Dutch plan sponsor would be higher rates and higher equity markets. Everyone wants the value of their assets to be higher but we also want the value of the liabilities to be lower. You have that seesaw reaction. Where Dutch plan sponsors have found the road they have been taken down is interest rates have gone down so that has increased the value of liabilities but at the same time asset prices have been falling so if we get a resolution and we get better clarity for financial markets, yes it would be good news for plan sponsors in that you would imagine rates would begin to rise back more. We still see we are in an interest rates are lower for longer scenario and we don’t expect interest rates to rise dramatically anytime soon because the resolution of the eurocrisis is just one leg of what is going on at the moment. We still have other economic problems around – the euro is just one of them.”