Pension Pulse

Suzanne Woolley of Bloomberg reports, You're About to Get Too Expensive for Your Pension Plan : The federal budget deal  could speed the long, lingering death of old-fashioned defined-benefit pension plans , in which employers reward years of service by providing a guaranteed stream of income in retirement. The deal could affect any pre-retiree in a former employer's pension plan by increasing the per-head premiums that plan sponsors must pay to the Pension Benefit Guaranty Corp. If it goes through as written, every person in a plan will get more expensive at the stroke of a pen. Employers are already deeply concerned about the extent and uncertainty of  future pension liabilities  and are trying to shed them. The proposed increase in the budget legislation would push even more pension plans to manage costs any way they can, including reducing participant head count, said Alan Glickstein, a senior retirement consultant with Towers Watson. The budg...

Adam Mayers of the Toronto Star reports, How a 30-minute chat with Trudeau broke Ontario’s pension logjam : Justin Trudeau came to town Tuesday and managed to achieve, in a 30-minute meeting with the premier, what 18 months of effort had previously failed to do. Trudeau removed one of the biggest obstacles to the progress of Ontario’s retirement pension plan, namely the issue of how to the collect the premiums and keep track of what is owed in payments. It’s an unexciting piece of bureaucratic process, but it’s also absolutely vital. If the government can’t keep accurate records, the plan will fail. This missing piece is one reason why there’s been little visible movement in the past year on the Ontario Retirement Pension Plan (ORPP). The plan's outline is this: The ORPP is coming in 2017, starting with larger employers. The plan is aimed at those Ontarians who lack a company pension plan; at its best, it will replace about 15 per cent of income to maximum earnings of $9...

Barbara Shecter of the National Post reports, CPPIB adds Mumbai to list of global offices, commits to stake in Cablevision : The Canada Pension Plan Investment Board has opened an office in Mumbai to support and expand on $2 billion of investments made in India since 2010. The new Mumbai office joins a list of seven international hubs including London, Hong Kong, New York and Sao Paulo. As with the others, the office in India will allow the pension giant’s management team to develop local expertise and partnerships, and will provide access to investment opportunities that “may not otherwise have been available,” said chief executive Mark Wiseman. He noted that Canada’s largest pension has already made investments in the country in segments including infrastructure, real estate and financial services. These include a 3.9 per cent stake in Kotak Mahindra Bank, India’s third-largest private sector bank by market capitalization, and a US$332-million investment in L&T In...

Jeff Cox of CNBC reports, Junk bond market betting big against Fed rate hike : Traders have been using junk to bet against the possibility that the Federal Reserve will raise interest rates anytime soon. Exchange-traded funds that track high-yield bond indexes have been the beneficiaries of a cash surge in recent weeks as market participants figure the central bank probably won't raise rates in 2015, and it could be well into 2016 before anything happens. In just the past week alone, three bond-related ETFs pulled in $2.4 billion. Two are focused on high-yield, or junk, bonds, according to ETF.com, despite repeated warnings on Wall Street that the segment of the market is headed for the rocks. The iShares iBoxx $ Investment Grade Corporate Bond , the iShares iBoxx $ High Yield Corporate Bond and the SPDR Barclays High Yield Bond have been hugely popular. During October, the group has pulled in $6.6 billion, with the two junk funds attracting about $4.3 billion of the...

Chris Flood of the Financial Times reports, Global ranking of top pension funds : Denmark and the Netherlands are the only two countries with pension systems that could be regarded as “first class”, according to a comprehensive global pensions study. The two countries rank first and second in the Melbourne Mercer Global Pension Index, which measures the health of the pension systems in 25 countries to assess whether they will be able to deliver adequate future provision. The report, produced jointly by Mercer, the consultancy, and the Australian Centre for Financial Studies in Melbourne, says that big reforms are required to improve the pension systems of some of the world’s most populous countries, including China, India, Indonesia and Japan. Japan, Austria and Italy score poorly in the report. They have high levels of government debt, inadequate pension assets and ageing populations, finds the study. David Knox, senior partner at Mercer, says: “There is no easy solution,...

Nick Thornton of Benefitpro reports, DC vs DB: 4 views on new EBRI data (h/t, Pension Tsunami ): This week’s new data from the Employee Benefits Research Institute adds a new dimension to the vital question of the country’s retirement readiness. In the report, researchers show that often, 401(k) plans can do a better job of replacing income in retirement than defined benefit plans can. The report simulates savings outcomes for workers currently age 25 to 29, with at least 30 years of eligibility in a 401(k) plan. It measures how often replacement rates of 60, 70, and 80 percent can be achieved by workers in four income quartiles if they participate in a 401(k) plan, compared to those levels of income replacement rates for participants in defined benefit plans. When measured against a 60 percent income replacement rate, traditional pensions beat 401(k) for all workers, except those in the highest income quartile. But as replacement rates are increased, 401(k) participa...