A roundup of recent worldwide news and developments in the pensions arena, by Anne Bennett, Mercer
The inability of asset manager AIJ to account for most of its funds under management has led to a review of governance by corporate pension schemes in Japan. AIJ, which managed more than 90 corporate pension schemes covering around 880,000 members, was stripped of its registration after the scandal broke in February. Losses are thought to be in the region of £1.4bn.
A recent survey found that over 40% of major Japanese corporate pension schemes have taken or plan to take action to strengthen risk management. However, faced with pressure to increase investment returns, over 70% of respondents say they will continue or start to diversify into assets other than bonds and equities. Rules governing the fund management sector were eased in the 1990s, but commentators claim that the supervision system is now inadequate and needs to be reviewed.
Austria’s parliament has approved an austerity package for 2012 to 2016 aimed at achieving savings and additional tax income of nearly €28bn (£23bn). As part of the wide reaching measures, state pensions in payment will be increased at less than the rate of inflation. Also early retirement, currently widespread in Austria, will be made less accessible.
The recent budget announced a rise in the retirement age for the state Old Age Security (OAS) pension from 65 to 67. The increase will be phased in between 2023 and 2029. The OAS pension, currently worth around Canadian $6,000 (£3,800) a year, is financed from general tax revenues and eligibility is based on residence. Age requirements for associated dependants’ allowances and income tested supplements will also rise.
A study of the 100 largest corporate pension schemes in the US found that funding deficit levels stood at a record high at the end of 2011. The average funding ratio was 79.2% and the collective funding shortfall was nearly US$ 327bn (£206bn). The growth in deficits resulted from a combination of declining equity values, reduced interest rates and higher liabilities.
Author: Anne BennettAnne Bennett is a retirement senior associate at Mercer