August 2020

10Aug

US. California’s immense pension dilemma

California’s public employee pension dilemma boils down to this: The California Public Employees Retirement System has scarcely two-thirds of the money it needs to pay benefits that state and local governments have promised their workers. Moreover, CalPERS’ official estimate that it is 70.8% funded is based on an assumption of future investment earnings averaging 7% a year, which probably is at least one or two percentage points too high. In the 2019-20 fiscal year that ended June 30, CalPERS...

August 10, 2020
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04Aug

UK. FTSE 350 pension deficit rises as COVID19 lockdown eases

Mercer’s Pensions Risk Survey data shows that the accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies increased from £90bn at the end of June 2020 to £103bn on 31 July. Liability values rose by £13bn to £970bn at the end of July compared with £957bn at the end of June. Asset values were £867bn (unchanged since the end of June). Charles Cowling, Chief Actuary, Mercer, said: “Pension scheme deficits worsened again...

August 4, 2020
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July 2020

22Jul

UK. Impact of COVID-19 on life expectancy could reduce pension scheme liabilities by up to £90bn

Impact of COVID-19 on life expectancy could reduce pension scheme liabilities by up to £90bn New XPS forecasting shows long-term vulnerabilities in pension schemes following the pandemic. In some scenarios the long-term economic impact of COVID-19 on life expectancy could be 50% higher than the short-term impact of the pandemic. The economic impact on schemes' assets is also a significant consideration. Especially for those schemes holding growth assets and/or with low hedging ratios. Read also UK. Cybercrime and Pensions...

July 22, 2020
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14Jul

US. Milliman analysis: Corporate pension funded ratio at 83.7% in June as discount rate hits historic low

Milliman, Inc., a premier global consulting and actuarial firm, today released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. Despite solid investment returns, June's PFI funded status worsened by $6 billion due to an 11 basis point drop in the monthly discount rate, from 2.76% in May to 2.65% for June. This month's discount rate marks the lowest observed in the 20-year history of the Milliman PFI. The PFI...

July 14, 2020
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07Jul

The coronavirus crisis is pushing 13 UK universities towards insolvency, study says

Social distancing measures, travel restrictions and lockdowns have tested the ability of universities to survive without students. The institutions at higher risk of collapse are those with a large share of international students and those with significant pension obligations, the IFS said. Thirteen universities, or colleges, in the U.K. are at risk of going bankrupt as the coronavirus pandemic hits their finances and challenges the entire sector, a study by Institute for Fiscal Studies warned Monday. Social distancing...

July 7, 2020
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June 2020
20Jun

Returning to the Core: Rediscovering a Role for Real Estate in Defined Contribution Pension Schemes

By Debbie Harrison, David P. Blake, Tony Key The objective of the research was to analyse and evaluate the role of real estate in the UK’s defined contribution (DC) pensions market in relation to auto-enrollment – the new system of pension scheme provision for private sector employees in the UK, which is being phased in by all employers between October 2012 and 2018. The most important feature of auto-enrollment schemes is the ‘default fund’, which is the multi-asset investment strategy...

June 20, 2020
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10Jun

U.K. deficits rise as coronavirus continues to hit markets

The total deficit of U.K. defined benefit funds covered by the Pension Protection Fund's 7800 index worsened 37% in May to £176.3 billion ($217.6 billion). The deficit was £128.5 billion as of April 30. The deficit of U.K. defined benefit funds also deteriorated over the year ended May 31, from £38.1 billion as of May 31, 2019, London-based PPF said Tuesday in an update. Read also UK. Regulator repeats anti-scam warning as £5m lost to fraud The funding ratio of...

June 10, 2020
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10Jun

Supreme Court Clears Bankruptcy Restructuring of Puerto Rico Government Pension Plans

On June 1, 2020, the Supreme Court of the United States issued a unanimous decision in Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, LLC, No. 18–1334, holding that the selection of the members of the Financial and Oversight Management Board for Puerto Rico did not violate the Appointments Clause of the U.S. Constitution. Consequently, the Board’s actions regarding the management and control of the budget and other financial matters of the government of Puerto Rico,...

June 10, 2020
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May 2020
22May

US pension funds approach point of no return

The issues facing public pension funds in the US are widely known, and while it's not clear how exposed to the recent market correction funds were, analysis from Wirepoints of 2018 data shows some may have reached the point of no return. Looking at asset-to-payout ratios of 148 state and local pension funds with more than US$2 billion in assets, the worst-off funds are those that are already well known for their pension shortfalls. These are in Kentucky, Illinois,...

May 22, 2020
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19May

US. How Lawmakers Can Raise Teacher Pay Without Decimating Pension Funds

When the pandemic hit, school districts across the country were in the process of giving their teachers a raise. But hiking teacher salaries now will strain state pension funds at a time when the economic fallout from the coronavirus is decimating public pension systems. In March, Moody’s Investment Service said U.S. public pension funds had already suffered nearly $1 trillion in investment losses. Lawmakers can’t make lost assets reappear. But they can take a step that will reduce future...

May 19, 2020
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