Pension overhaul for US state; France tackles pension reform; Deutsche Bank to take on BMW liabilities; Church of England amends pension rules for gay clergy
US pension overhaul continues
New Jersey is the latest state to introduce pension reforms for public employees.
Under new proposals, all public workers would be required to contribute 1.5 per cent of their salary toward their health benefits and the state would scale back pension eligibility, including part-time workers who would be banned from participating in the underfunded state pension system. The New Jersey state pension system covers more than 700,000 state employees and teachers. The fund shells out US$6.1 billion ($6.8 billion) in pension benefits a year. A report released in February by research group the Pew Center showed there was a current gap of US$1 trillion ($1.11 trillion) in terms of pension benefits promised across US states and those that were available. Recent investment losses accounted for a portion of the growing funding, but several states fell behind on payments to cover promised benefits well before the recession and only a handful had set aside meaningful funding for retiree healthcare and other non-pension benefits, the report said. The good news, according to Pew Center managing director Suzan Urahn, was that policy makers were spurred on to make reforms despite the current economic climate. "The bill for public sector retirement benefits already threatens strained budgets. It will continue to rise significantly if states do not bring down costs or set aside enough money to pay for them," Urahn said.
France tackles pension reform French President Nicolas Sarkozy has announced plans to introduce draft legislation to reform the French pension system by September. The country is facing an estimated pension shortfall of €10.7 billion ($16.2 billion) in 2010. The French government will sit down with workers, unions and business groups in April to hammer out reform proposals, but is expected to face opposition to key proposals. As well as increasing pension contributions, the government is considering raising the retirement age from 60, a hot-button issue in a country long used to regulated working hours and long holidays. France has one of the lowest retirement ages in the Organisation for Economic Co-operation and Development group of countries. Germany and the United Kingdom are considering raising their current retirement age of 65 to 67.
Survey predicts phase-out of UK defined benefit schemes The recent financial crisis has accelerated the demise of the final salary benefit and a number of United Kingdom companies expect defined benefit schemes will disappear in the next decade. In a survey published in February by the Economist Intelligence Unit and sponsored by Buck Consultants, entitled "The Future of Corporate Pensions", 251 executives were asked about the biggest challenges their firms would face in 2010 in managing pension schemes. Increasing deficits, regulatory intervention and uncertainty over future interest rates topped concerns. Tweny per cent of those surveyed still offered a defined pension scheme to new employees, but three-quarters predicted the schemes would no longer exist by 2019. Participants forecast a growing trend for transferring liabilities to an insurer in the post-recession period. Just 7 per cent have already transferred some of their liabilities to a third-party insurer in the past three years and 6 per cent have transferred all their liabilities, but 10 per cent had plans to transfer their entire schemes in the next three years and almost two-fifths said they expected to transfer some liabilities.
Deutsche Bank to take on BMW liabilities Deutsche Bank is set to take over the longevity risks of an estimated £3 billion ($5.2 billion) of pension liabilities from BMW's United Kingdom pension plan, according to The Financial Times. The deal will be done via the bank's insurance subsidiary, Abbey Life, and structured with pensions firm Paternoster, owned 40 per cent by Deutsche Bank.
Mexico relaxes pension investment rules Mexico's pension fund regulator has said it will relax investment rules to give fund managers access to more Mexican stocks. New rules will allow pension funds to buy limited amounts of individual stocks listed on the Mexican stock exchange. Mexico had previously restricted fund exposure to risky assets by limiting investments in companies over a certain size and on certain investment indexes. Mexico's pension funds have an estimated US$85 billion ($94.5 billion) under management.
Church of England amends pension rules for gay clergy The Church of England will extend equal pension entitlements to the civil partners of deceased clergy.
The church's ruling party has voted to grant gay civil partners the same rights as heterosexual married partners. However, while the church allows gay clergy to register their civil partnerships, they are expected to remain celibate.
Part three of our four part roundtable video series. A whole generation of Australians are about to enter retirement, the need for a dependable income streams in the immediate future top of mind.... Watch»
Part two of our four part roundtable video series. A whole generation of Australians are about to enter retirement, the need for a dependable income streams in the immediate future top of mind.... Watch»
Part one of our four part roundtable video series. A whole generation of Australians are about to enter retirement, the need for a dependable income streams in the immediate future top of mind. ... Watch»
In an unsurprising attack on financial planners, ISN accused the advice industry of operating ongoing asset-based fees as merely commissions by another name.
