Pension Pulse

Jilian Mincer and Steven C. Johnson of Reuters report, Mom and pop investors miss out on stock market gains : Stocks have more than doubled since the financial crisis and are closing in on a five-year high, but many Main Street investors have been absent from the party - especially those with the least saved. Those who missed much of the rally did so because they reduced equity exposure after the benchmark S&P 500 index plummeted 57 percent between late 2007 and March 2009, according to an analysis by Reuters of mutual fund flows and changes in assets held in retirement accounts. Investors with the smallest savings typically saw the lowest percentage recovery in returns. And while some have returned to the stock market during the subsequent rally, plenty of small investors remain on the sidelines. "This is the most uncelebrated bull market in history," said Tony Ferreira, managing director at Cogent Research, which provides research and consulting for large fun...

CBC News reports, Conservatives back hike in MP pension contributions : The Conservative caucus has accepted a government proposal that would ease the burden on taxpayers by more than tripling how much members of Parliament and senators kick into their pension plans, CBC News has learned Currently, MPs and senators contribute around $11,000 a year to their own pensions, while taxpayers add about $64,000 for each pension plan. Under the proposal, it would be a 50/50 split, CBC's national affairs editor Chris Hall reported. A 50/50 contribution split would bring the parliamentary pension plan in line with changes being implemented for the federal public service. If the pension plan's benefit levels do not change, politicians may need to contribute close to a quarter of an MP's current salary to meet taxpayers halfway. At current benefit levels, parliamentarians would have to contribute around $38,000 a year, a jump of more than $25,000 from what they pay now. ...

Richard Blackden of the Telegraph reports, European pension funds among victors as Bank of America reaches $2.4bn settlement over Merrill Lynch : America’s second-biggest bank struck a deal with investors to end a near four-year legal battle that was destined for trial in a New York court next month. PGGM, which helps manage €125bn (€100bn) in the Netherlands, and AP4, one of Sweden’s state pension funds, are among those who had led the litigation in Manhattan. Analysts said the deal will likely result in a third-quarter loss for BoA after it set aside $1.6bn to help fund the payout. Brian Moynihan, the bank’s chief executive, insisted that the agreement removes the “risk and uncertainty” that a trial would have involved. “They’ve decided this on the courthouse steps,” said Roy Smith, a professor of finance at New York University. “They decided that they really didn’t want to face a jury trial.” The lawsuit, filed just weeks the $18.5bn acquisition of Merrill was sealed in J...

Tom Hirst of Mindful Money opines, Popular unrest in Spain could push Europe into a dangerous new phase (h/t, Yanis Varoufakis): The eruption of popular unrest in Spain and a rising threat of Catalan secession could push Europe into a dangerous new phase. While central bank action may have calmed the bond markets in recent weeks, it has done little to alleviate the consequences of harsh austerity on the populations of struggling states. Where one country in a monetary union is running a current account surplus, it is a good bet that a large part of it is being funded by deficit spending from other member states. If there is then a market disruption those countries with a deficit can quickly get into trouble unless they are able to rebalance their economy. The narrative fits neatly for countries such as Germany and Greece. Between 1997 and 2007, GDP growth in Greece averaged 4% - around twice the average for the region as a whole. This impressive growth rate was financed throu...

Michael McDonald of Bloomberg reports, Mendillo Returns to Farms as Harvard Vies for Ivy Rebound : Jane Mendillo, who took over as head of Harvard University’s $32 billion endowment four years ago, is still searching for an edge. While Harvard has recouped about half of the $10 billion it lost after global financial markets collapsed in 2008, Stanford, Columbia and Princeton universities have been posting bigger gains. Colleges are preparing to report modest returns for the year ended June 30 after the Standard & Poor’s 500 Index posted only a 3.1 percent gain. “People are competing for outsized returns and there are fewer and fewer of them available,” said Brad Barber, a finance professor at the University of California, Davis. “The best and brightest might be able to find something.” Endowments and foundations had the worst returns of any class of institutional investor, gaining just 0.37 percent for the year through June, Wilshire Associates said in an Aug. 6 report. ...

Sophie Baker of Financial News reports, Dutch pensions thrown lifeline by government : The Dutch Cabinet has sent a letter to Parliament outlining a new framework that could alleviate the need for the country's pension schemes to carry out “unprecedented” benefit cuts. The "September Pension Package" has been developed by the Cabinet and the Dutch regulator, De Nederlandsche Bank. In a letter to the Lower House of Parliament, State Secretary Paul de Krom, the minister of social affairs and employment, said the measures put plans on “a more manageable and balanced footing”. In February, DNB warned that 103 of the Netherlands’ 454 pension funds were facing cuts to benefits by the end of next year, because they were falling far below their funding targets. DNB requires that pension funds have a funding ratio of at least 105%. Falling below that means they must submit a recovery plan to the regulator, detailing how they will get back to the threshold. At the t...