According to the recent study “Global Wealth 2107” from Boston Consulting Group (BCG), the worldwide private financial wealth reached $166 trillion by the end of 2016. On average, the global financial wealth of households grew by 5.3 percent in 2016, compared to 4.4 percent the previous year.
In the United Kingdom, the switch from a defined-benefit (DB) pension system to a defined-contribution (DC) system is effective in the private sector.
For pension funds, one important piece of data used to estimate the engagement of the fund is the discount rate. This rate is used to evaluate the present value of the pensions to be paid in the future to retired beneficiaries of the plan.
Defined-benefit pension plans are in turmoil for many reasons: increase in longevity, ageing populations, inflation and protracted low interest rates are causing funding gaps to pension funds and their sponsors.
The consequences of lower rates on pension funds have been reported in numerous articles, but the low long-term rates environment is expected to last, according to many experts. The challenge for pension funds is the medium-term impact on profits and solvency.