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Asset Allocation

Mercer Survey: Equities Boost US Pension Ratios

A Mercer study shows the improvement in financial markets last year added billions to companies' balance sheets. 

(January 13, 2010) — Last year’s improvement in financial markets helped remedy the damage on U.S. pension funds, possibly adding $180 billion to companies’ balance sheets, a survey showed.

According to Mercer, a benefits consulting firm, U.S. pension funds were 85% funded with a deficit of $229 billion at the end of December compared with 75% and a $409 billion deficit a year earlier.

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“This will be welcome news for plan sponsors. Over two-thirds of U.S. companies have a financial year-end of December 31,” Adrian Hartshorn, a member of Mercer’s Financial Strategy Group, said in a press release. The improved funded status of pension plans will improve earnings and reduce the need for future cash contributions, he added.

With increasing reliance on equity markets, Mercer also warned funds are especially vulnerable to volatility. U.S. pension funds have had 19 consecutive months of deficit, since May 2008, the survey showed.



To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>
Home > News > Newsmakers > Trying to Save Pension, AA Stands Its Ground
Newsmakers

Trying to Save Pension, AA Stands Its Ground

AA hopes to keep its retirement plan open to new joiners.

(January 13, 2010) — The Automobile Association is one of three companies in the UK’s FTSE 100 index to stick by the expensive defined benefit pension scheme. It’s also “desperate” to keep its retirement plan open to new joiners.

 

While many UK firms, such as Barclays and Tate & Lyle, limited or withdrew DB pension benefits in 2009, the AA is unique.

 

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The car insurance and recovery firm, owned by the buyout firms Permira, Charterhouse Capital Partners and CVC Capital Partners, is negotiating with unions about the future of the pension plan. “We do not want to move from a defined benefit arrangement, which we see as a valuable benefit for employees,” said chief executive Andrew Strong in a recent letter to staff, according to Financial News Online. 

 

Currently, AA pays pensions based on members’ average earnings throughout their careers, rather than their final salary. AA wants to alter its pension to make it less expensive.



To contact the <em>aiCIO</em> editor of this story: Kristopher McDaniel at <a href='mailto:kmcdaniel@assetinternational.com'>kmcdaniel@assetinternational.com</a>

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