IGTA Journal - Summer 2020

Luxemburg, Article: Negative interest rates and COVID 19, the Molotov Cocktail By Francois Masquelier, Chairman of ATEL, the Luxemburg IGTA Member Association, and Deputy Chairman of EACT, European Association of Corporate Treasurers, from Simply TREASURY – Luxembourg, August 2020 After a decade of very low interest rates and even negative in some currencies, the pressure is even higher on pension plans which promises a certain payment to members. But the Corona virus has compounded many of these problems. For people with individual pension accounts (i.e. classic Defined Contribution – not CDC) the challenge of building up enough savings has become harder and harder. The paradoxical situation is that this trend has been exacerbated. The value of the assets has been hit and the liabilities have gone up with lower interest rates. It is what we could call a “double whammy”. The global long-term picture of pension funds has been hit for some time. At the World Economic Forum, they have warned that the retirement savings gap and shortfalls between what people currently save and what they need IGTA eJournal | Summer 2020 | 30