Quantitative easing by the European Central Bank (ECB) will likely cause an increase of 11%-18% – between €58 billion and €92 billion – in European pension liabilities for the year 2014, says Senior Director at Standard and Poor’s, Paul Watters. He explains to Actuarial Post that the sharp fall in long-term corporate bond yields – which was only partly offset by a drop in long-term inflation expectations – is to blame for the deteriorating funding conditions of corporate defined-benefit (DB) pension plans. He is pessimistic looking forwards, concluding that struggling DB pension schemes could suffer further as the combined effects of weak growth, low bond yields and rising inflation create a potentially toxic recipe.
The €92 bn increase in European pension liabilities is a by-product of QE, says S&P
March 11, 2015
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