US -California governor Arnold Schwarzenegger equated the state's rising pension costs to a "locomotive" and pledged to make pension reform a priority in 2010 in his annual State of the State address yesterday.
Addressing the California legislature, he said: "We are about to get run over by a locomotive and we can see the lights coming at us. We can see the lights coming. I ask the legislature to join me in finding the equivalent of a water deal on pensions, so that we can meet current promises and yet reduce the burden going forward."
The state currently spends US$3bn per year funding pension deficits and that amount is expected to increase to $10bn, he said. The current cost of the state employee system has jumped by 2000% over the past decade, Schwarzenegger continued, while revenues are only up 24%.
The governor called for the legislature to consider ways to reign in costs including changing the pension provisions for new hires, though current employees won't be affected.
He said: "Now, for the current employees these pensions cannot be changed, either legally or morally. We cannot break the promise that we already made. This is a done deal."
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.