Global Financial Stability Notes

Pension Funds and Financial Stability

March 6, 2025

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"Pension Funds and Financial Stability", Global Financial Stability Notes 2025, 001 (2025), accessed March 9, 2025, https://doi.org/10.5089/9798229002608.065

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Summary

This Global Financial Stability Note examines the growth of the pension fund sector and the potential financial stability implications. Historically, pension funds have been seen as a contributor to financial stability because of their long-term and well-diversified liabilities. However, the sector has undergone significant structural shifts accelerated by a prolonged period of low interest rates, increasing its exposure to traditional risks while introducing emerging risks; this is reflected in growing intra-financial sector interconnectedness and exposure to long-term sovereign bonds. The recent transition to higher interest rates should be positive for the pension sector, albeit its pace and abruptness has been associated with liquidity stress and contagion risks in some countries.

Subject: Expenditure, Financial sector policy and analysis, Financial sector stability, Labor, Pension spending, Pensions

Keywords: Assets, Financial sector stability, Financial Stability, Global, Pension Funds, Pension Plans, Pension spending, Pensions, Risks

Publication Details

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