International

European pension schemes are scrambling to assess their potential losses from the alleged $50 billion fraud by prominent Wall Street trader Bernard Madoff. Some of the largest pension schemes in Europe told Reuters they were exposed to Madoff’s asset management firm via fund of funds structures.

Thomson

The ongoing financial crisis has dealt a heavy blow to private pension systems. Between January and October this year, private pensions in the OECD area have registered losses of nearly 20% of their assets (equivalent to USD 5 trillion). ­

This fifth issue of Pension Markets in Focus takes a close look at the impact of the crisis and discusses possible policy interventions, both immediate and longer term. Some of the material contained will be further developed in the forthcoming edition of the Private Pensions Outlook, a new OECD publication.

OECD Pension Markets in Focus

Companies with pension plans would receive billions of dollars in recession-era relief in a House bill that supporters said could deter employers from freezing those plans or laying off workers. The legislation, passed by voice vote late Wednesday, also gives a break to some seniors who are required by law to draw down savings from their now-depleted IRA and 401(k) retirement funds. The Senate is trying to clear the bill, and send it to President George W. Bush for his signature, before the likely adjournment of Congress at the end of this week.

AP

The total deficit of British pension schemes facing a funding shortfall worsened to 155 billion pounds at the end of November, the Pension Protection Fund (PPF) said. The overall deficit of those pension schemes was at 122 billion pounds at the end of October and 58.3 billion at the end of November last year.

Reuters

European pension fund managers are predicting colleagues will simplify their investment strategies in light of the recent market turmoil, look for lower average returns and apply a “back to basics” approach to risk management in the future.

IPE

If there’s any doubt America faces its gravest financial crisis in decades, consider this sobering evidence: Pension plans for some of the 1,500 largest U.S. companies have lost about $280 billion so far this year. In November alone, pension plans lost about $130 billion, marking the second consecutive month of record declines, according to a new report from Mercer, the financial consulting firm. The companies Mercer studied — those in the Standard & Poor’s 1,500 index, which includes household names like 3M and Coca Cola — reported their pension plans ended 2007 with a $60 billion surplus. So the swiftness of this year’s decline is astonishing. (Read «Is It OK to Pray for Your 401(k)?»)

Time / Mercer

The International Monetary Fund (IMF) has published a report suggesting Icelandic pension funds could be a key component in rescuing its domestic economy if they were to purchase local government bonds.

IPE

Die argentinische Präsidentin Cristina Kirchner lässt die privaten Pensionskassen verstaatlichen. Damit fließen Milliarden in das staatliche Rentensystem. Für die Börse und den argentinischen Kapitalmarkt ist die Maßnahme eine Katastrophe.

Handelsblatt

Nach dem argentinischen Unterhaus hat auch der Senat für die Verstaatlichung privater Rentenversicherungen gestimmt. Die Regierung will angeblich die Ersparnisse der Rentner und Arbeiter schützen.

Das Gesetz sieht vor, dass private Rentenkassen mit Guthaben von umgerechnet rund 20 Milliarden Euro in Staatsbesitz übergehen. 46 Senatoren stimmten für das Gesetz, 18 dagegen. Im Unterhaus hatten 160 Abgeordnete aus dem Regierungslager für den Gesetzentwurf gestimmt, 75 dagegen.

Das Gesetz ist stark umstritten. Die Opposition befürchtet, dass die Regierung das Vermögen der Pensionskassen für den Schuldendienst einsetzen wird. Allein im kommenden Jahr werden im Staatshaushalt Tilgungen und Zinsen in Höhe von 15,6 Milliarden Euro fällig.

NZZ online

As was the case during the equities markets collapse in 2001, the current financial turmoil will reshape the political debate in Europe over public pension reform and the structure of pension provision. While all privately funded pensions in Europe will suffer unavoidably in the short term from the general malaise in financial markets and the expected low growth in the real economy, the more important implication of the crisis is that debates will intensify among policymakers and practitioners over the broader issues of pension fund governance and collective risk-sharing.

Herald Tribune

With pension funds facing billions of dollars in shortfalls as markets plunge, a range of companies from Ford to Verizon are pushing Congress to suspend portions of a two-year old law they say could force them to make job cuts as they shift scarce money into ailing retirement pools.

The lobbying effort aims to change a 2006 pension reform law as part of any economic stimulus plan in a lame-duck session of Congress that begins next week. Companies warn the current law could force them to tie up large sums of cash they desperately need in the face of a global recession.

Roughly 300 companies and business groups plan to make the request in a letter Wednesday to congressional committees. The authors include some of the nation’s biggest corporate names from a wide range of sectors, including Ford Motor Co., IBM Corp., Pfizer Inc. and Verizon Communications Inc.

AP

The Pension Protection Fund (PPF) has revealed the aggregate funding position of almost 7,800 defined benefit (DB) schemes reached a deficit of £97.3bn (€119bn) at the end of October.

IPE