No more room for traditional pension funds on both sides of the Atlantic?
In its latest Global Pension Study, MSCI said North American and Western European corporations showed the highest average ratio of underfunding in 2016. The U.K. in particular is hurting right now, with the uncertainty over negotiations that will pave the way for the country to leave the European Union.
The latest figures from the London-based Pension Protection Fund's 7800 index of DB funds show an aggregate £220.4 billion deficit for the corporate funds as of Aug. 31 2017. Data from the financial regulator De Nederlandsche Bank show the number of retirement plans in the Netherlands has fallen 62.4% to 192 over the decade ended June 30, largely due to consolidation. Corporations have been closing their DB plans to further accruals, and generally have been trying to reduce their pension exposure.
Martijn Vos was interviewed on this subject recently.
As low interest rates and growing deficits continue to blight corporate defined benefit funds, sources expect to see more plan sponsors globally freeze or otherwise alter their retirement offerings. Corporations have been closing their DB plans to further accruals, and generally have been trying to reduce their pension exposure by having more investments be liability driven. Another strategy is to transfer the risk to insurance companies by buying annuities for covered retired employees.