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Refilling The Pension Tank

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NU Online News Service, March 27, 3:49 p.m. – Towers Perrin Inc., Valhalla, N.Y., came out with a report earlier this week stating that global defined-benefit pension funding levels fell 10% to 15% worldwide last year.

Meaning that more than 10% of all the pension wealth in all the world went poof, despite all the best intentions of armies of pension managers and pension advisors.

So what can plan sponsors do to turn things around?

Massimo Borghello, a senior actuary in Towers Perrin’s global resources group, suggests (surprise!) that sponsors may simply have to put more cash in to some plans.

But Borghello also recommends taking a fresh look at all the economic and demographic assumptions made about future funding levels.

“Take a long view based not only on experience, but also on what your workforce looks like now,” Borghello says.

Changes in discount rates can have an obvious, huge effect on funding levels.

But more subtle factors, such as salary increases approved when times were good and decreases in employee turnover now that times are bad, could also affect funding levels, Borghello warns.


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