Jan-Pieter Jansen, a 77-year-old retiree from the Netherlands, had high hopes for a worry-free retirement after having saved diligently into a pension during his working life.
But Jansen, a former manager in the metal industry, has been forced to reappraise his plans after receiving notice from his retirement scheme, one of the Netherlands’ biggest industry-sector funds, of plans to cut his pension by up to 10%. Understandably, the news has hit like a sledgehammer.
“This is causing me a lot of stress,” says Jansen, who retired 17 years ago and hoped to use his pension pot to treat his grandchildren and afford good hotels on holidays. “The cuts to my pension will mean thousands of euros less that I can spend on the family and the holidays we like. I’m very angry that this is happening after I saved for so long.”
Jansen is not alone in experiencing pension pain. Tens of millions more pensioners and savers around the world are facing the same retirement insecurity, as plunging interest rates since the financial crisis wreak havoc on the funding of schemes. As average life expectancy increases, pensions have become a defining political issue in countries as diverse as Russia, Japan and Brazil.
General Electric, the industrial conglomerate, recently announced that it is joining a growing list of companies that are ending guaranteed “final salary”-style pension schemes, affecting about 20,000 of its employees. In the U.K., tens of thousands of university academics are preparing to take strike action over steep rises in their pension contributions.
A common factor in this global pension upheaval has been suppressed bond yields.
Bonds have historically provided a simple match for the cash flows needed to be paid out to the members of retirement schemes. But decades of...