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Newsmakers

OPERS Board to Cut COLAs in 2019

New plan must still be approved by the General Assembly.

By Chris Butera

The $90 billion-plus Ohio Public Employee Retirement System (OPERS) board approved a plan Wednesday to reduce cost-of-living adjustments (COLA) for its more than 1 million members, current retirees, and future pensioners.

The plan was voted in favor with a 7-2 vote. Of the 11-member board, one member was absent and one seat is currently unfilled. The move will reduce COLAs from their current 3% rate to a 2.25% cap to match the Consumer Price Index beginning in 2019. While the proposal must still be approved by the General Assembly, the plan is projected to save OPERS—which is 80% funded for the future and meets the 30-year state law requirement for pension liability payments—about $4 billion.

The affected plan members are those who retired after January 2013. Beginning in 2019, the index-matched COLAs are not to exceed 3%.

However, implementation to the new proposal would be delayed two years for members who retired between 2010 and 2012.

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The Columbus Dispatch reports that state officials have said the cost-of-living benefit is intended to “lessen and not completely offset the effects of inflation on pension benefits.” They also say that retirees have financially benefitted from this because there have only been five instances where the Consumer Price Index capped at 3%, meaning their cost-of-living increases were larger than inflation.

Due to its financial position, the board’s decision did not go without some controversy.

“We don’t have to do any of this. Everything I see, everything I read … says we are financially strong …. in fact, I would say this is a solution in search of a problem,” retiree-representing board member Steve Toth told the Dispatch, adding that the plan is a “pay cut” for members. “Our retirees have been hit by a one-two punch. They have had to deal with rising cost of premiums, rising cost of prescription drugs and out-of-pocket expenses, and in 2012, we went through the health care reform.”

While no one on OPERS’ board wants benefits reduced, the goal is to protect the fund’s members for the future and the uncertainty it brings.

“We’re not here to make people unhappy. We’re here to protect people’s lives and their futures, and sometimes you just have to suck it up and do something even though you know, and I know, it’s [going to] hurt me. I’m [going to] have to go home and explain this to my wife,” investment expert James Tilling, who was appointed to the board by the General Assembly, told the Dispatch. “I’m not minimizing any of the sacrifices. I wish it didn’t have to happen.”

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Home > News > Research > FCA: UK Millennials Are Cash-Strapped, Under-Invested
Research

FCA: UK Millennials Are Cash-Strapped, Under-Invested

The majority of 25- to 34-year-olds have no investments, and lag in savings.

By Michael Katz

A large swath of British millennials have little or no savings whatsoever, according the UK’s Financial Conduct Authority’s (FCA) recently released Financial Lives Survey 2017.

The sweeping, nearly 200-page survey is the largest tracking study ever commissioned by the FCA, with the ambitious goal of estimating the number of UK adults holding any one of 70 products, profiling those who do and do not hold these products, and observing their financial behavior and experiences. It also aims to demonstrate the differences in behavior and experiences by sector, and identify and quantify harm or potential harm

According to the survey, 13% of UK adults have no cash savings at all, while 24% have saved less than £1,000 ($1,300) in total, and 19% have savings between £1,000 and £5,000. Millennials were among the most cash-strapped, the FCA said.

“Most 25- to 34-year-olds have relatively little in the way of savings, and what savings they do have are predominately in cash rather than equity‑based investments,” said the report.  And only 16% of millennials who are saving their money are doing so for longer‑term objectives, such as to provide an income for retirement, compared to 35% of all UK savers.

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“With limited time to build up, cash saving levels for 25‑to 34-year-olds are relatively low,” said the report. “One in five (19%) 25‑to 34-year-olds have no cash savings whatsoever, and a further 30% have cash savings of less than £1,000.”

The mean amount of cash savings held by 25‑ to 34-year-olds is £11,000, which is less than half the £25,000 for the average UK adult. Additionally, 85% the group has zero investments. As a result, the mean investment amount held by 25‑to 34-year-olds is just £2,000, less than one-fifth over the average for all adults in the UK, which is £11,000.

However, the survey found that workplace benefits are driving pension take‑up as millennials settle into employment and their careers. “There are signs that auto‑enrollment into workplace pensions is having a successful impact,” said the report.

Almost half (48%) of 25‑ to 34-year-olds now hold a defined contribution pension, while 14% have a defined benefit pension, and 97% of pension holders currently making contributions arranged these pensions through an employer. At the same time, their pension pot sizes are not very large. Just over half of those surveyed said they have a pension pot of less than £10,000.

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