Pension Companies at Risk From Low Interest Rates

The IMF (International Monetary Fund) recently warned that pension companies and insurers could be at risk if the current low interest rates continue. “The solvency of many life insurance companies and pension funds is threatened by a prolonged period of low interest rates,” it said in its GFSR (Global Financial Stability Report).

“Low interest rates add to the legacy challenges facing many insurance companies and pension funds, along with those from ageing populations and low or volatile asset returns. Heightened concern over these important long-term saving and investment institutions could encourage even greater saving, adding to financial and economic stagnation pressures.”

“Many pension funds face funding gaps, where the present value of future liabilities exceeds the market value of their assets.”