Declining yields on bonds hurt corporate pension schemes

Frankfurt

HISTORICALLY low interest rates in the euro area are becoming an increasing headache for companies forced to set aside billions in extra cash to meet their pension obligations to employees.

The European Central Bank's (ECB) ultra-easy monetary policy, with record low interest rates and unprecedented bond purchase programmes, has contributed greatly to the decline in yields on bond markets. That is not good news for the in-house schemes that many companies offer employees to help top up their state pensions.

Like banks and insurers all across the eurozone, these corporate pension funds usually rely on adequate yields or interest rates to help increase and max…