November 2021

The Rising Age of Retirement and Life Expectancy

For many people retirement is something to look forward to, with it being a new stage to life with no work and endless opportunities. Our Life Plan has predicted how old individuals will be when they retire up to 29 years into the future. They have looked into the rising age of retirement across 36 OECD countries, revealing that some workers can expect to be 82 when they retire. The team has also predicted how long these individuals can expect to...

Quantifying the Impact of Impact Investing

By Andrew W., Ruixun Zhang We propose a quantitative framework for assessing the financial impact of any form of impact investing, including socially responsible investing (SRI), environmental, social, and governance (ESG) objectives, and other non-financial investment criteria. We derive conditions under which impact investing detracts from, improves on, or is neutral to the performance of traditional mean-variance optimal portfolios, which depends on whether the correlations between the impact factor and unobserved excess returns are negative, positive, or zero, respectively. Using...

How Will COVID-19 Affect Pensions for Noncovered Workers?

By Jean-Pierre Aubry, Kevin Wandrei, Laura Quinby Federal law allows certain state and local government employees to be excluded from Social Security if they are covered by an employer pension of sufficient generosity. As a result, approximately one-quarter of state and local workers are not covered by Social Security on their current job. Before COVID-19, these “FICA replacement plans” all satisfied the letter of the law in terms of providing benefits of sufficient generosity. This study has three aims. The...

Fiduciary Duty, Social Conscience, and ESG Investing by a Trustee

By Max M. Schanzenbach, Robert H. Sitkoff This chapter, prepared for the 2021 Annual Heckerling Institute on Estate Planning, examines the law and economics of environmental, social, and governance (ESG) investing by a trustee. Trustees of pensions, charities, and personal trusts invest tens of trillions of dollars of other people’s money subject to a sacred trust known in the law as fiduciary duty. Recently, these trustees have come under increasing pressure to use ESG factors in making investment decisions. ESG investing...

¿De qué va el plan de reestructuración de la deuda pública de Puerto Rico y por qué se protesta?

Los puertorriqueños tuvieron la oportunidad de expresar sus temores acerca de un enorme plan de reestructuración de la deuda pública ante una jueza con poder de decisión sobre el futuro económico de Puerto Rico. Tras meses de disputas entre abogados, economistas y tenedores de bonos, la sesión fue una ocasión para que jubilados, amas de casa y otros compartieran sus preocupaciones de que el plan pueda asfixiar a las pequeñas empresas, congelar las pensiones o causar más dificultades en un...

El gobierno y Grupo México acuerdan fondo de pensiones para mineros de Cananea

El gobierno federal y la empresa minera Grupo México firmaron este jueves un convenio para crear un fondo de pensiones para trabajadores de Cananea, en el estado de Sonora. El acuerdo fue suscrito por la secretarías del Trabajo (STPS) y de Gobernación (Segob) y por el Instituto Mexicano del Seguro Social (IMSS), en el marco del Plan de Justicia para Cananea. Javier García de Quevedo, vicepresidente de Grupo México, fue quien firmó el convenio en favor de los extrabajadores mineros de...

U.S. Steel to Transfer About $284 Million of Pension Obligations

United States Steel Corp. said it will transfer about $284 million of pension plan obligations via a purchase of annuity contracts from two units of Legal & General Group PLC. The purchase results in the transfer of administrative and benefit-paying responsibilities for about 17,800 U.S. retirees and beneficiaries. The steel company said "this transaction is yet another meaningful step in strengthening the company's balance sheet and further de-risking our pension plan, a plan that remains more than 100% funded and is...

UK. DC schemes urged to offer more pension choices at retirement

Only 11 per cent of defined contribution (DC) pension schemes offer members a full suite of options to access funds at retirement, despite this delivering the best outcome for members, research from XPS Pensions Group has found. XPS's DC Member Outcomes Report revealed that members with access to a full range of flexibilities at retirement, including access to flexible drawdown, a cash lump sum or an annuity, are more likely to make choices that allow them to maximise the funds...

Build a Solid Risk Management Road Map

“The COVID pandemic itself didn't fundamentally change how risk management for pension plans should be addressed, but it did confirm why it’s important to have a sound risk management framework,” said Francois Pellerin, multi asset-class strategist at Fidelity Investments. “Plan sponsors who adopted the risk management best practices we’ve been preaching were able to adapt to market changes faster and emerge from the crisis in better shape than those who didn’t adopt those practices,” he said, speaking at Pensions...

Experts say the 4% rule, a popular retirement income strategy, is outdated

Market conditions are pressuring the 4% rule, a popular rule of thumb for retirees to determine how much money they can live on each year without fear of running out later. Withdrawing money from one’s nest egg is among the most complex financial exercises for households. There are many unknowns — the length of retirement, one’s spending needs (health costs, for example) and investment returns, to name a few. The 4% rule is meant to yield a consistent stream of annual...