Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics and Global Head Fixed income in the Global Investment Center of the Private Bank of ABN AMRO, was a guest at VPRO-show Buitenhof last Sunday. Together with Theo Kocken and Ilja Boelaars she discusses the pressure on pensions.
Not only does the unanimity on the pension agreement seem increasingly distant, but there is also a feverish search for a last resort to prevent discounts. Problems are seen for all pension funds. Liabilities are discounted against the extremely low interest in our economy. Some of the coverage ratios suffer as a result. The lesson to learn is in which extent we want to be at risk of the interest rate. Through choices made in the past, we have a whole range of returns for the different pension funds. Funds at the bottom face a dilemma. If the interest rate risk is closed completely now, you admit that you're in the well. ‘Afterwards you know a lot, but at the time being it seemed to be the right choice.’ Thus Pieterse-Bloem.
A proposed solution to the problem is a change in the actuarial rate. This would result in pension money shifting from the young generation to the baby boomers. According to Pieterse-Bloem, the situation is discussed on a too narrow base. More premium is collected than we pay out and there are great buffers. The situation is far from being the same as in America.
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Watch the entire program on VPRO, 10 November 2019 (in Dutch).