Pension Pulse

Miles Johnson and Andrew Parker of the Financial Times report, Ferrovial sells Heathrow stake to UK pension fund : Ferrovial, the Spanish infrastructure and construction group, on Tuesday unveiled plans to sell a further stake in the holding company that controls London’s Heathrow airport to a UK university pension scheme for £392m. Inigo Meiras, Ferrovial’s chief executive, said the deal was not prompted by the company’s objections to the proposed new regulatory regime for Heathrow –under which the airport would no longer secure inflation-busting increases in the landing charges paid by airlines for using its facilities. Ferrovial, Heathrow’s largest shareholder, has agreed to sell an 8.65 per cent stake in FGP Topco, the holding company for Heathrow Airport Holdings, to the UK Universities Superannuation Scheme. Ferrovial plans to remain the largest shareholder at FGP Topco, with a 25 per cent stake, after the planned deal. “Following this deal, we reiterate our role i...

The Canada News Wire reports, New analysis confirms that defined benefit pensions provide significant benefits to Canadian economy : Canadian retirees with defined benefit (DB) pensions are far less likely than other retirees to collect the government's Guaranteed Income Supplement (GIS), shows a study on the economic impact of DB pension plans. The study, conducted by the Boston Consulting Group (BCG), confirms that an estimated 10 to 15% of DB beneficiaries collect the GIS, compared with 45-50% of other Canadian retirees. DB pensions reduce the annual pay out of GIS, a supplementary government benefit provided to low-income seniors, by approximately $2-3 billion a year. The study also finds that defined benefit recipients contribute $14 - $16 billion annually to government coffers across Canada through income, sales and property taxes. The study was commissioned by a group of Canada's leading DB pension plans: Healthcare of Ontario Pension Plan (HOOPP), Ontario Munic...

Joe Morris of the Financial Times reports, Private equity tries to crack $5.3tn US pension market : Pantheon Ventures is bidding to become the first private equity manager to crack the US’s vast defined contribution pension market. A growing number of private equity firms have been sizing up the retirement plans, which sit on $5.3tn in assets. Though traditional corporate pensions have long dedicated portions of their portfolios to private equity, and the asset class ranks as a top performer for the plans, it remains conspicuously absent on 401(k) and other defined contribution platforms. “No real progress has been made in terms of attracting clients, but we have certainly seen a lot of interest from private equity managers in the DC space,” says Nathan Voris, large market practice leader at Morningstar, the data provider. Mr Voris says most private equity aspirants, which are thought to include KKR and Carlyle Group, are still studying the market, but last month Pantheon b...

Noah Buhayar of Bloomberg reports, Buffett Adds Stocks in Pension Handoff to Lieutenants : Billionaire Warren Buffett is betting that his deputy investment managers can find value hiding in a corner of Berkshire Hathaway Inc. (BRK/A): its $10.4 billion in pension assets. Todd Combs, 42, and Ted Weschler, 52, have been building stock portfolios with funds they oversee for defined-benefit plans at Berkshire subsidiaries, including railroad Burlington Northern Santa Fe. The strategy saves Buffett’s company fees it would pay to outside asset managers and could reduce the need for contributions to the pensions. “For his whole career, Buffett has been extremely choosy about who he will allow to manage Berkshire’s money,” said James Armstrong, president at Henry H. Armstrong Associates, which oversees about $400 million, including shares in the Omaha, Nebraska-based company. “Now he’s got two young guys who have a lot of energy and some capacity, and I think it makes perfect sense” ...

Bob Collie, chief research strategist at Russell Investments writes, Pension plans have a massive bet on interest rates rising : Most pension plans have long-dated liabilities and much shorter-dated assets. In effect, their structure replicates the classic buy-short-sell-long trade: a trade which amounts to a bet on rising interest rates. The scale of that bet can be illustrated by looking at how the pension deficit has grown in the past four years at some of America’s largest corporations – we call them the $20 billion club ¹. At the end of financial year 2008, the 19 club members had a combined pension deficit on their balance sheets of $136 billion. In the ensuing four years, those corporations made cash contributions of $100 billion; that’s $48 billion more than the value of the new benefits that accrued. The plans earned double-digit returns on their investments; investment returns exceeded the interest cost on liabilities by $108 billion. Yet still the pension def...

Adam Radwanski of the Globe and Mail reports, Ontario weighs benefits of building its own public pension plan : Ontario’s government is considering making the province the first to offer its own public pension plan on top of the federal one. Sources inside the government told The Globe and Mail that Finance Minister Charles Sousa will likely lay the groundwork in next month’s Fall Economic Statement, hinting that if his federal and provincial counterparts won’t agree to enhancements to the Canada Pension Plan when they meet in December, Ontario will take action on its own. Such a move by Ontario would represent the biggest step to date in the country’s efforts to address mounting concerns about the income security of younger generations largely unable to rely on private pension plans – and a major gamble on the part of Premier Kathleen Wynne that Ontarians would be willing to take more money off their paycheques to address that problem. Whether that’s a gamble worth taking i...

Justin Harper of the Telegraph reports, Denmark is top of the world's good pension spots : When it comes to having the world’s best state pension scheme, Denmark sits top of the country rankings. The health or otherwise of a national pension scheme can have a big impact on an expat's finances, depending on where they decide to head. According to the Melbourne Mercer Global Pension Index , which compares 20 countries with major retirement schemes, the Netherlands has the second best pension scheme in the world. Australia, which runs a national pension fund called Superannuation (or Super for short), came in third, which will please British expats relocating Down Under. If foreign workers qualify for Superannuation and they decide not to retire in Australia they can claim these contributions back when they leave. Such flexibility helps a national pension scheme’s rankings. The survey also looked at the tax advantages of the pension, its benefits, costs and performa...