Workers in the deeply damaged European economy have a further issue to ponder, besides their current woes: Four years of near-zero interest rates mean their nationalized pension plans are also in serious trouble. It's an issue which can also be felt here in the United States.
According to Reuters, that no-gain investment climate and the ongoing series of market panics have led to record lows for the low-risk German, British and U.S. government bonds which pensions are normally based upon.
With returns that are being beaten by inflation, which runs at around 2 percent in most of Europe, workers hoping to enjoy a well-funded retirement are finding the value of their savings slipping further and further. As we also find here at home.
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"For governments in Northern Europe and North America, it's about gaining time, avoiding any painful adjustments, keeping interest rates artificially low and hoping things will improve," Nicolas Firzli, co-chair of the World Pensions Forum, told Reuters.
British savers have seen their pension holdings drop by as much as 20 percent, thanks to low interest rates, poor market returns and the government's decision to print more money.
"People are only just starting to understand how profound an impact these policies are having when it's too late," said Nigel Green, CEO of DeVere Group, a British financial advisory firm. "When they see the figures, they quickly realize they don't have the funds to finish work. They are working longer if they have the choice. But some can't, and not everyone wants to employ someone who is older."
Many corporate pension funds in the U.K. are using hedging tools like inflation, longevity and interest rate swaps to improve chances of meeting liabilities even if markets continue to sour.
BMW, British Airways and broadcaster ITV have offloaded an aggregate 5 billion pounds of pension risks to insurers and banks via these derivatives since 2010.
And British workers are realizing that they will likely have to stick with their jobs for much longer than planned to reap any benefits from their defined benefit pension plans; the issues with pension schemes (as they're called overseas) has also fostered more interest in Independent Savings Accounts, a British variation of the 401(k) plan.
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