{"id":173556,"date":"2020-07-13T10:30:05","date_gmt":"2020-07-13T14:30:05","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=173556"},"modified":"2020-07-13T08:17:18","modified_gmt":"2020-07-13T12:17:18","slug":"the-perfect-storm-brewing-for-company-pensions","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/07\/the-perfect-storm-brewing-for-company-pensions\/","title":{"rendered":"The perfect storm brewing for company pensions"},"content":{"rendered":"
July 13, 2020<\/div>
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By George Prior<\/strong><\/p>\n

Company pensions are becoming increasingly unsustainable due to the plunge in government bond yields and low interest rates, warns the CEO of one of the world\u2019s largest financial advisory and fintech organizations.<\/p>\n

The warning from Nigel Green comes as the yields of government securities \u2013 in which pension funds heavily invest – have fallen dramatically since the coronavirus crisis.<\/p>\n

Mr Green says: \u201cInstitutional investors, such as pension funds, have always traditionally invested in government bonds, as they\u2019re widely regarded as a safe-haven.<\/p>\n

\u201cHowever, the world has changed considerably in six months.<\/p>\n

\u201cAround the world, government bond yields are plunging as a direct result of the record-breaking asset purchase schemes introduced by central banks to help ease a severe worldwide economic slump due to the pandemic.<\/p>

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\u201cAnd as the historic stimulus is set to remain, or even be expanded, the pressure on bond yields is expected to intensify.\u201d<\/p>\n

He continues: \u201cThe far-reaching stimulus agendas and more than a decade of ultra-low interest rates \u2013 which could be going even lower – are creating a perfect storm for company pensions, which are already feeling the squeeze of ballooning deficits.<\/p>\n

\u201cIncreasingly, no longer are government bonds delivering the returns required to fulfil the obligations made to retirement savers.\u201d<\/p>\n

The deVere CEO also underscores the ongoing issues of the wider bond market.<\/p>\n

\u201cThe falling yields have forced pension funds, and other institutional investors, to make highly unusual changes to their asset allocation mix as they seek out better returns in riskier assets.<\/p>\n

\u201cBut then, the question is: If pension funds don\u2019t buy government bonds, who will?<\/p>\n

\u201cChina has been a major purchaser of U.S. bonds in the past to keep its export prices down. With its $1trn of Treasurys it\u2019s the number two holder.<\/p>\n

\u201cBut the new economic realities and geopolitical tensions have prompted Beijing to shed some of its U.S. bonds. In March alone, China sold $8bn of its hoard \u2013 in the same month as overseas investors and central banks got rid of $300 billion of Treasurys to raise dollars.\u201d<\/p>\n

Mr Green concludes: \u201cTypically, bonds account for more than half of the assets held by pension schemes.<\/p>\n

\u201cDue to the falling bond yields, the potential for negative interest rates, and the already chronic deficits, company pension holders should seek with their adviser the available ways to safeguard their retirement income.\u201d<\/p>\n

About<\/strong>:<\/p>\n

deVere Group is one of the world\u2019s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.\u00a0 It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

By George Prior Company pensions are becoming increasingly unsustainable due to the plunge in government bond yields and low interest rates, warns the CEO of one of the world\u2019s largest financial advisory and fintech organizations. The warning from Nigel Green comes as the yields of government securities \u2013 in which pension funds heavily invest – […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-173556","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173556","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=173556"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173556\/revisions"}],"predecessor-version":[{"id":173557,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/173556\/revisions\/173557"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=173556"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=173556"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=173556"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}