US cities feel financial heat from pensions
US - The budgets of many US cities are being pressured by growing pension fund contributions at a time when other rising costs were also competing for city resources, a study by Standard & Poor's Rating Services has found.
Cities in the US have seen their mean funded ratio drop from nearly 100% in 2000 to 84%, the report on the pension and debt statistics of the 20 largest cities rated by S&P found.
With the final results of fiscal 2006 pension investment returns still incomplete and full actuarial valuations months away, S&P said it expected that at least most of the earlier large investment losses would have worked their way through the actuarial model, thus opening the door for funding improvements in the future if the markets cooperate.
But it stressed that meeting the assumed long term investment rate of return required to bring funds back into balance, historically around 8%, would be a continuing challenge for fund managers.
S&P credit analyst Parry Young said the degree to which the downward trend on the mean funded ratio continued was dependent on a number of unpredictable variables, including investment performance, actuarial assumption changes, and potential increases in longevity.
Unfortunately, cities have varying degrees of control over these factors, said Parry.
S&P said it would continue to monitor the pension liabilities and funding levels of US cities.
By Damian Clarkson
Latest stories
Five stories you may have missed this week
This week's top stories included Cardano announcing plans to acquire Now Pensions from a Dutch pension fund later this year.
RBS reports £100m GMP impact; slashes equity exposure by two thirds
Royal Bank of Scotland (RBS) faces a £102m impact on liabilities as a result of equalising guaranteed minimum pensions (GMPs), according to its annual results.
Good communications are more important than ever
Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point
Back to Top
