Pensions - Articles - ECB QE - Comment from JLT on impact on pension funds

 “The ECB’s extension of its QE programme is not a surprise, given the continued weakness in the Eurozone economy and the lack of inflationary pressure. However, this is bad news for pension schemes as it suggests the ECB feels interest rates may stay very low for longer than expected. Our research, launched in October, suggested that a delay of 12 months in interest rates rising could see total UK pension scheme deficits balloon by £62bn.

 “Most pension schemes are currently following investment strategies which are not fully hedging interest rate exposures - most LDI programmes are only partially hedging interest rate exposures. As a result, if interest rates rise more slowly than anticipated by markets, then this will increase pension scheme liabilities and, potentially, pension scheme deficits.”