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UK DB Plans Back in Black?
The UKPA reports, Defined benefit pensions 'in black':
December's
stock market rally helped the UK's defined benefit pension schemes end
the year back in the black, figures have shown.
The country's
6,560 defined benefit schemes, including final salary pensions,
collectively had a £21.7 billion surplus at the end of December,
according to pensions safety net the Pension Protection Fund.
The
funding position was a considerable improvement on the £1 billion
deficit at the end of November, while it was also up on the £6.6 billion
surplus in December 2009.
The change was driven by a strong
performance from global stock markets during the month, with the FTSE
All-Share Index rising by 7%, contributing to a 3.4% rise in the value
of pension schemes' assets.
This gain was enough to offset a 1%
increase in the liabilities pension schemes face due to a fall in
index-linked gilts during the month.
But
despite the overall improvement, 60% of defined benefit pension
schemes still have a funding shortfall, with a collective deficit of
£61 billion.
Defined-benefit pensions have become increasingly
expensive to offer in recent years in the face of investment volatility
and increased life expectancy.
The majority of companies have closed the schemes to new members, with many shutting them to existing ones as well.
They
are being replaced with less generous defined contribution schemes,
under which the individual shoulders all of the risk of investment
volatility and increased life expectancy.
Meanwhile, Investments & Pensions Europe reports, UK roundup: Russell Investments, Pension Protection Fund index:
Russell Investments has warned pension funds that lack of good governance on their part can lead to a loss of return.
The
asset manager said the ever-growing problem of underfunding, as well
the increasing number of sources of risk, posed problems for schemes.
Sorca
Kelly-Scholte, managing director of consulting and advisory services,
said:
"If governance structures are to match the investment ambitions
of a pension fund, funds first need to be able to review their existing
decision-making structure from an informed standpoint.
"Poor governance can cost pension funds up to 3% per annum. Our research has shown a clear 'confidence bias' amongst pension funds about their current decision-making processes."
Kelly-Scholte
said 86% of respondents felt their current decision-making structure
was effective, "despite evidence of non-conformity with agreed
principles of best practice".
Meanwhile, schemes in the Pension Protection Fund (PPF) index closed the year with a surplus of £21.7bn, an improvement from its £1bn deficit in November.
While aggregate liabilities rose by £9bn between November and December, overall assets increased by more than £30bn.
Funding
ratios across all 6,500 schemes also rose to 102.3%, despite the
majority of schemes still being in deficit and only 40% being fully
funded.
However, compared with the previous month, almost 250 fewer schemes are in deficit.
Poor
governance can cost pension funds up to 3% per annum? That sounds right
but poor governance can really clobber pension funds when the beta tide
starts receding. Importantly, it's in down markets that you really get
to see the ravaging effects of poor governance on a pension fund's
performance. If there is no oversight and accountability, all the risk
management in the world won't protect pension funds from suffering huge
losses. Good governance is the cornerstone of excellent pension fund
management.
As far as UK and global pension plans, all seems
stable for the time being, but that can shift abruptly. Bloomberg
reports that Luigi Buttiglione, head of global strategy at Brevan
Howard, Europe’s biggest hedge-fund firm, said the greatest risk to
global economic growth would be the failure of European Union leaders
to tackle the sovereign-debt crisis:
The
cost of insuring European sovereign debt has climbed to a record on
concern backstopping the region’s banks will overwhelm government
finances.
“The only hope, if there is real
risk of getting out of hand, is to be ahead of the curve and try to
surprise” the markets, Buttiglione told a conference at the
headquarters of asset management firm Notz Stucki & Cie. “The
alternative could be a disorderly one in which the market forces you
to do something and the consequences could be unpredictable.”
The European Commission said last month that Europe’s financial
aid funds for distressed governments will sell bonds to raise as much
as 34.1 billion euros for Ireland in 2011 and 14.9 billion euros in
2012.
As I
stated before, I strongly doubt European leaders and the ECB will sit idly by and watch the euro zone sink. However, the environment
in Europe is ripe for policy blunders. If they don't tackle the
sovereign debt crisis, markets will react and pension funds around
the world will slip back into the red.
»
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I recall a huge number of comments on the "contractual" arrangements in the U. S. pension/retirement system a few articles ago. I forget who had a real woody for keeping sacrosanct these "contracts". Here is one for him to gnaw on:
The remainder of the article is a real eye-opener. I'll post it here because it is a subscriber access only:
LITTLE ROCK — The Garland County treasurer had received more than $268,000 in retirement benefits when the state retirement system notified her in March that it would stop the payments, a letter filed in Pulaski County Circuit Court shows.
The letter was attached to a lawsuit filed last week by Jo West Taylor and three other former and current elected county officials who are appealing the Arkansas Public Employees Retirement System’s determination that the officials improperly collected pension benefits without ever “terminating” their employment, as a state law requires. Taylor received a lump-sum distribution and just over a year and a half of monthly payments.
In addition to Taylor, those included in the appeal are former Garland County Assessor Brenda Short, former Garland County Circuit Clerk Vicki Rima and Woodruff County Treasurer Marlene Hite.
The officials have acknowledged that they took themselves off their county payrolls while continuing to work to qualify for pensions. After three months, the officials went back on the payroll, receiving salaries in addition to the retirement benefits.
After finding that they failed to properly sever their employment, retirement system Director Gail Stone in May of last year cut off the benefits Taylor, Short, Rima and Hite, along with those of two Desha County officials and the Quitman recorder-treasurer. The system’s board in September rejected Taylor’s appeal of Stone’s decision. In October, the board ruled that Short, Rima and Hite had missed a deadline for filing their appeals.
The officials’ retirement benefits were enhanced by a state law giving elected county and city officials two years of service credit for every year they work.
State Rep. Allen Kerr, R-Little Rock, is a sponsor of legislation that would eliminate the two-for-one credit for officials elected after July 1, 2011. The two-for-one credit was ended for legislators in 1991.
Kerr on Tuesday called the pension benefits disclosed in the letter to Taylor “extremely excessive.”
“I wouldn’t even call that a benefit,” Kerr said. “I’d call that an abuse of the system that the average person doesn’t have access to.”
Attorney Denise Hoggard of Little Rock, who filed the lawsuit on behalf of the officials, said retirement benefits were part of the officials’ overall compensation.
“It was promised to them, just like any other employee for the state of Arkansas or who is otherwise covered by the system,” Hoggard said. “I think we should actually honor the promises we make to those employees, especially after they have worked to earn it.”
In the lawsuit, filed Friday afternoon, Taylor, Short, Rima and Hite contend that they followed the law and relied on advice from retirement system staff on how to meet the requirement under Arkansas Code 24-4-520 to “terminate” their employment.
The officials also say the retirement system improperly adopted a regulation setting the deadline for appeals without allowing an opportunity for public comment and legislative review called for in the state’s Administrative Procedures Act.
It notes that, while he was a member of the retirement system board, Larry Fratesi stopped working during the last three months of his term as Jefferson County assessor in 2004 so that he could begin collecting a pension in addition to his salary.
Stone later decided that Fratesi had retired correctly because he did not continue working during the three months. The lawsuit also notes that Don Zimmerman retired for one month from his job as director of the Arkansas Municipal League while serving on the retirement system board.
The lawsuit asks for Stone’s decision to cut off the officials’ benefits to be overturned or for the officials to be allowed to retire again and have their benefits recalculated to give them credit for the time they worked after their initial retirements. It also asks for Stone, the system and its board members to be ordered to pay damages.
Retirement system officials “breached their duty owed to the individual members,” Hoggard said Tuesday.
The elected officials “followed the direction of APERS. They had a right to rely on that, and it was either bad information that was given to them or it got reversed,” she said.
Retirement system attorney Jay Wills has denied that the system’s staff told elected officials they could meet the termination requirement by taking themselves off the payroll while continuing to work.
In the March 8, 2010, letter to Taylor, included as an exhibit to the lawsuit, Wills notified Taylor that Stone had found Taylor’s Sept. 1, 2008, “retirement” to be invalid because Taylor later signed official correspondence while off the county payroll and did not vacate her office. Taylor, Rima and Short went back on the county payroll in December 2008.
The letter requested that Taylor repay the system $268,050.52 for the pension benefits Taylor had received since Sept. 1, 2008. The system later dropped the demand that Taylor and the other elected officials repay the benefits, saying it agreed that a statute of limitations prevented the system from recouping the money.
Although she had only been retired for 19 months at the time she received the letter in March, Taylor had received 50 months worth of payments in a lump sum under the system’s Partial Annuity Withdrawal plan, records indicate. The exact amount wasn’t specified in the letter. The plan allows retirees to receive up to 60 months’ worth of pension payments at once upon retiring in exchange for a reduced monthly pension amount.
That indicates Taylor’s monthly pension payments averaged $3,884 per month, or $46,608 a year. Short has previously said her pension is about $3,000 a month. Each of the Garland County officials also received salaries of $61,385 in 2009. The amount of their salaries last year wasn’t available Tuesday because county offices were closed due to the snowy weather.
The lawsuit does not include the pension amounts of the other Garland County officials or Hite. Hoggard said she included the letter to Taylor because it was required under the procedures for appealing a state agency’s decision. She declined to provide information about the other officials’ pension benefits, saying it is their “personal information.”
This article was published today at 5:17 a.m. http://www.arkansasonline.com/news/2011/jan/12/retiree-reaped-6-figure-p...UK & USA are 100% bankrupt. FED's POMO's jacking up copper, gold, silver, oil etc. and miners bubble at its top. China not happy with rising miners and going to raise interest rates & tightening. Hu is going to talk with Obama about this daily manipulation. FED is a criminal institution and should be abolished asap.
David99
How are China going to tighten and keep the Peg to the Dollar, won´t tightening automatically cause the Yuan to rise?