The March 2010 deficit for final salary pensions in the UK stands at £94 billion ($155.8 billion), up from £36 billion ($59.7 billion) a year ago, according to Aon Consulting (Aon), with over half of UK companies reporting huge increases in their final salary scheme deficits as of 31 March.
Deficits mounted up as assets increased over the same period by £118 billion ($195.6 billion), but accounting liabilities of the affected schemes ballooned to £591 billion ($979.5 billion) compared to £175 billion ($290 billion) in March 2009, as investment-grade bond yields fell from 6.9 per cent to 5.6 per cent and expectations of long-term inflation rose.
Aon head of corporate solutions, Marcus Hurd, said the numbers will prompt more companies to look at restructuring their pensions. "It's a harsh reality that you cannot look at pension scheme assets and liabilities in isolation. The financial sophistication is there for companies to hedge a significant proportion of pension scheme risk, so it's surprising that many are still so significantly exposed," Hurd said.
EU and IMF step in to help Greece
Describing his country's debt crisis as a "sinking ship," Greek premier George Papandreou has requested a rescue package from the European Union (EU) and International Monetary Fund (IMF). The 45 billion euros ($64.9 billion) package is part of an emergency aid contingency plan that will provide Greece, which has debts in excess of 300 billion euros ($432.8 billion), with loans mainly from EU members and some 10 billion euros ($14.4 billion) in loans provided by the IMF directly.
In a statement, IMF managing director Dominique Strauss-Kahn noted the "need for speed" and expressed confidence that the loans would be approved. "We are all aware of the seriousness of the situation," Strauss-Kahn said.
The move prompted protesters to take to the streets in Athens to express their concerns about austerity measures tied to the loans, including pension and other spending cuts.
Speaking at the World Bank in Washington DC on 25 April, Greek finance minister George Papaconstantinou said the government had already initiated a three-year stability and growth program, which included pension reform.
Last month, Greek singer and former Euro MP Nana Mouskouri offered her 25,000 euros ($36,067) European parliamentary pension to the country's coffers and urged other Greeks to help their country.
Mexico boosts pension investment options
Mexico's private pension funds are looking to invest US$1 billion ($1.1 billion) in a range of sectors including real estate, infrastructure and private equity, Reuters reports. According to the news agency, the Mexican stock exchange and regulators have approved ten projects for pension fund investment.
Mexico has 14 private pension funds with an estimated US$85 billion ($91.6 billion) worth of assets. Deregulation earlier this year allowed funds to expand investment in private equity and more access to domestic stocks.
Aviva reviews pension scheme closure
One of Britain's largest pension providers, Aviva, is looking at closing its pension scheme to existing members a year from now. Aviva closed its pension scheme to new members in 2001 and says it will consult with employees to look at transferring existing members to a form of defined contribution pension. The fund includes around 2000 RAC employees and has until now remained open to new members.
Goldman Sachs faces fraud charge
The fallout from the mortgage securities meltdown has heated up again as the US government brought the most serious legal action to date against Goldman Sachs.
The Wall Street investment bank stands accused of fraud in a civil suit being brought by the Securities and Exchange Commission (SEC), which claims the bank defrauded two investors by leaving out key details about mortgage securities just as the housing market soured.
According to the SEC, the bank failed to disclose to ACA Management and IKB Deutsche Industriebank that hedge fund, Paulson & Co (Paulson), was betting against the same securities that featured in a portfolio of collateralised debt obligations (CDOs) that Paulson compiled and Goldman Sachs promoted.
Goldman Sachs called the lawsuit "completely unfounded" and vowed to defend itself against the charges.
The use of CDOs reached a peak in 2007 and were used by several investment banks. With Goldman Sachs in the spotlight, market commentators anticipate more charges may be brought by the SEC.
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