Posted By RichC on January 10, 2015
One would think that a “rising tide lifts all boats” when it comes to gains for financial markets, but that is not the case for conservatively managed U.S. pension funds. The strong stock market returns during 2013 and 2014 have helped most individual investors recover from the 2008 financial collapse, so as long as they remained invested, but private pension funds actually lost ground. The trend is not pretty when looking at this last slow recovery from the Great Recession (Towers Watson graph below).
According to a CNBC article citing Towers Watson, the “average private pension fund held about 80 percent of what it needs to cover payments. That’s down from 89 percent at the end of 2013 and represents an overall deficit among large corporate plans of about $343 billion, nearly double the shortfall a year earlier.”
In a previous interview with Dave Suchsland, a senior retirement consultant at Towers Watson, he stated, “We experienced another big year of pension de-risking in 2014, with significant lump sum buyout and annuity purchase activity. Given the change in funded status, we expect many plan sponsors will need to reevaluate their retirement plan strategies in 2015. Last year’s results surrendered most of the funded status gains earned in 2013. This year will most likely bring higher expense charges and unless there is an uptick in interest rates or equity market performance, eventually additional contribution requirements.”
So … should the Federal government (taxpayers) back pension funds?
I wonder where Rick Santelli comes in on this idea (video)?