GLOBAL - Private pension schemes lost an estimated US$5.4trn in 2008, prompting fears over the sustainability of retirement plans, according to a report by the Organisation for Economic Co-operation and Development (OECD).
It said governments should take a more active approach to regulating markets, with the promotion of building up funding buffers for defined benefit (DB) schemes during good times, and more flexibility for sponsors during poor market conditions.
Similarly, regulations should promote lower exposure to risky assets for defined contribution (DC) plans as workers age, in order to safeguard investments, particularly in countries where private pensions make up a "major component of retirement income".
The OECD also said there was a wide range of fees charged among member countries, which had an effect on final returns. It said if the same fees were applied in Hungary as Sweden, for example, member benefits would be almost a third (30%) higher.
The report said the pension funding crisis at the start of the century had been far surpassed by the present situation: "With asset values dropping by 20% on average in the OECD countries between January and October 2008, the ongoing crisis is affecting the retirement savings of millions of individuals around the world.
"Even if long-term investment performance figures are still relatively healthy, workers are rightly worried about the security of their pensions and there is growing pressure on governments to act."
A buyout tool which provides schemes with up-to-date pricing and comparisons between insurers has been launched by JLT Employee Benefits.
The DB white paper sets out plans to review the funding regime, with 'prudent' and 'appropriate' possibly redefined. But James Phillips asks if this could this signal a return to an MFR-like approach?
The trustees of GKN's pension schemes have agreed a package of mitigation measures that would improve funding to a "more prudent level" if Melrose's offer is accepted by shareholders next week.
While the new powers are welcome, most respondents doubt it will make a difference to the outcomes for members, Pensions Buzz respondents say.