US - The funding level of the three largest Californian pension funds has so far been understated due to the accounting rules used, a study by the Stanford Institute for Economic Policy Research (SIEPR) revealed.
The overall "true value" of the funding level of California Public Employees' Retirement System (CalPERS), California State Teachers' Retirement System (CalSTRS), and University of California Retirement System (UCRS) currently corresponds to a shortfall of more than half a trillion dollars, SIEPR said.
The latest data published by the three funds see combined unfunded liabilities as of July 1, 2008 - calculated with discount rates ranging from 7.5% to 8% - stand at US$55.4bn, while SIEPR calculates they actually stood at $425.2bn, if a lower rate of 4.14% were used.
Researchers said that if schemes comply with Governmental Accounting Standards Board rules they discount their future pension liabilities at the same rate they expect to earn every year on invested assets.
But, this rule would lead to use a risk-adjusted discount rate, while SIEPR believed a lower risk-free rates should be used because vested public pensions are guaranteed and "effectively riskless".
In addition, the three funds said they lost a total of $109.7bn between June 2008 and June 2009. This would bring the total funding gap to over $500bn.
SIEPR said: "Given the consequences of pension underfunding, we believe every effort should be made in short order to implement policy changes to reverse the current shortfall and prevent a similar shortfall in the future."
It added: "Improved long-term funding outcomes can be influenced through higher contributions, investment in less risky assets, and lower benefit levels."
The Pensions Regulator (TPR) and Labour MP Stephen Kinnock and will listen to the experiences of steelworkers when transferring their pensions away from the British Steel Pension Scheme (BSPS) next week in Port Talbot.
Just Group has acquired a 75% stake in the holding company of Corinthian Pension Consulting in a bid to strengthen its professional defined benefit (DB) advisory services.
The Pensions Regulator (TPR) has exercised its production order power under the Proceeds of Crime Act 2002 for the very first time as part of a fraud investigation.
The ITN Limited Pension Scheme has named Trafalgar House as its administrator for an initial term of five years.