From The Economist Global Agenda
As fears grow that
main stockmarkets are now about 25% above the low-point that they hit in March,
shortly before the start of the war in
In the stockmarket boom of the 1990s, since most pension funds were heavily invested in shares, they built up what were widely assumed to be comfortable surpluses. This even encouraged some companies to boost their short-term profits by taking "pensions holidays"-ie, suspending their contributions to the swollen funds of their staff pension schemes. But the extended slump in share prices has left many companies' pension funds with huge shortfalls, which in some cases threaten the firm's survival. Earlier this month, General Motors launched the biggest bond ever issued by an American company, to raise $17.6 billion, most of which will be put towards closing the estimated $25 billion deficit in its staff pension scheme.
The pensions of about 44m American workers are protected by the PBGC, which collects contributions from their employers' retirement schemes in return for a guarantee to come to the rescue if the pension fund becomes insolvent and the employer cannot make up the shortfall. In the 1990s this was rarely a problem: when firms went bust, their retirement schemes were usually in surplus so they could continue paying benefits to pensioners and their dependants. The PBGC itself thus enjoyed a growing surplus, which reached almost $10 billion in 2000. But this has been more than wiped out in recent years, as a steady stream of firms has gone bankrupt-some of them big ones, such as Bethlehem Steel and US Airways-leaving behind seriously underfunded retirement schemes. As a result, the PBGC now has a record deficit of about $5.4 billion.
this month Steven Kandarian, the PBGC's boss, raised the possibility that his
organisation might need a "general revenue transfer"-in plain
English, a bail-out by taxpayers-unless either the stockmarket recovered or the
PBGC charged the struggling pension funds higher premiums. Last week, the
General Accounting Office, the investigative arm of
measures, though, are unlikely to make much short-term difference to the PBGC's
precarious condition. Companies with big pension deficits are continuing to go
bust: in the latest such case, on July 24th the PBGC took over the pension
scheme of Thunderbird Mining, of
situation is most serious in
A tough new
accounting rule, FRS17, which will be fully enforced from 2005, will force
British firms to account for their pension funds' assets at market value (as
opposed to "smoothing out" the effects of stockmarket volatility) and
any deficits in the retirement scheme will have to be set against the firm's
profits. So by 2005, the CBI reckons, British firms will have been forced to
more than double their pension contributions, compared with those they made in
2000, to £43 billion. This will leave them with much less money to invest.
Since business investment is currently one of the main drivers of
While some firms are seeking to wind up their pension schemes and get out of the business of helping employees to save for their retirements, many more are taking the less drastic step of ceasing to offer "defined-benefit" or "final salary" pensions-ie, ones which pay a guaranteed proportion of a worker's salary on retirement. These firms' new recruits are being offered "defined-contribution" pensions, in which the value of their future pensions will not be guaranteed, but will depend on how well or otherwise their pension fund's investments perform-thereby transferring the risks from the employer to the employee. However, these companies still have many existing employees who have been promised final-salary pensions, and thus will continue having to bear the investment risks associated with these.
L'Express du 07/08/2003
Fonds de pension, la bombe à retardement
par Julie Joly
Les déboires boursiers menacent les retraites de 44 millions d'Américains
Le directeur de l'organisme d'assurance publique pour les fonds de pension américains n'en dort plus la nuit: créée en 1974, la PBGC (Pension Benefit Guaranty Corporation) enregistre cette année un déficit historique de 5,4 milliards de dollars. Il y a encore deux ans, ses comptes affichaient 7,7 milliards de bénéfice. Pour les quelque 44 millions de salariés et de retraités concernés outre-Atlantique, tous bénéficiaires de régimes de retraite dits à «prestations définies», ce sont environ 300 milliards de dollars de rente qui sont sur la sellette.
Au cours de 2002 seulement, la valeur des fonds de pension assurés par la PBGC a chuté de 11%, soit une perte sèche de 106 milliards de dollars. Or, ces derniers temps, pour éviter de grever leurs comptes déjà bien entamés par les déboires économiques et boursiers, nombre d'entreprises, aux Etats-Unis, ont largement sous-provisionné leur régime de retraite. Du coup, au moment d'honorer leurs dettes envers leurs salariés, elles se retournent vers leur assureur... Lui-même totalement démuni!