US - The number of large companies facing high degrees of financial risk from their pension liabilities has dropped by about half over three years to just 9%.
According to Watson Wyatt analysis of FORTUNE 1000 companies that sponsored DB pension plans in 2005, pension liabilities posed “relatively high amounts” of risk for only 9% of firms, down from 17% in 2003.
Meanwhile, more plan sponsors experienced relatively low pension-related risk, with liabilities posing scant risk to the core business to 60%, an increase from about 56% in 2004 and 51% in 2003.
“Thanks to a sound economy and considerable corporate contributions, America’s pension plans are generally on firmer financial footing than they were two years ago,” commented Mark Warshawsky, director of retirement research at Watson Wyatt.
“With anticipated improvements in pension plan funding due in part to new rules and reductions in pension risk, concerns about the strength of our pension system should be greatly alleviated.”
Watson’s Pension Risk Index, on which the findings are based, quantifies the amount of financial risk a particular company’s pension plan imposes on its core business. It measures the potential dollar value decline in a plan’s funded status under an adverse financial market scenario.
A separate analysis by the consultancy found the aggregate funding level for FORTUNE 1000 companies’ pension plans increased from 82% to 92% between 2002 and 2005.
Jonathan Stapleton asks whether newly-accredited professional trustees should be a statutory fixture on pension scheme boards.
Savers are being warned by the Insolvency Service to guard their pension pots from investment scammers and negligent trustees as it winds up 24 companies.
Respondents say they should only be required in certain situations as the system is not broken.