According to a survey conducted by Aon Consulting, employees and employers have a precarious ‘wait-and-see’ attitude when it comes to retirement programs. Employees are waiting for an economic recovery before moving forward with retirement, and employers are not addressing retirement program changes and risk issues.
Of the 1,313 employers surveyed, more than 90% are not changing their retirement programs, either in terms of benefits or management and 87% of respondents said employees are delaying retirement due to economic conditions.
Also, a third of employers have less than 70% of their employees enrolled in their defined contribution (DC) plans, with the majority saying they believe workers are not enrolled because they can’t afford it. Ninety-two percent of organizations are not changing their pension/defined benefit (DB) programs in the near future, citing the high cost of company-required contributions (71%), volatility (47%) and administrative costs (35%) as the main reasons. Employers also are not changing the risk profile of their pension plans, as two-thirds of these organizations have not made changes to their pension investments during the past two years and do not intend to do so in the next two years.
To learn more about this survey, click here.
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Investor confidence down
According to results of the State Street Investor Confidence Index for September, Global Investor Confidence fell by 4.7 points to 118.1 from a revised August level of 122.8. Regionally, there was some divergence in risk appetite.
The confidence of North American institutional investors declined slightly by 4.6 points from 118.3 to 113.7. Elsewhere, however, the tone was more upbeat. European Investor Confidence rose from a revised 109.3 to 110.9, while Asian investor confidence increased from a revised 91.9 to 93.1.
“After eight consecutive increases in Global Investor Confidence, which took the index from an all-time low of 82.1 during the financial crisis to a five-year high of 122.8, institutional investors took a breather this month and consolidated their holdings of risky assets,” says Harvard University professor Ken Froot, one of the developers of the State Street Investor Confidence Index. “This month’s reading of 118.1 is still comfortably in the range associated with the accumulation of risk exposures, as a reading of 100 signifies neither accumulation nor de-accumulation. However, there is recognition that a portion of the recent rise in global equity prices can be attributed to liquidity expansion rather than fundamental opportunities. Institutional investors are pausing to assess this balance.”
Developed through State Street Global Markets’ research partnership, State Street Associates, by Harvard University professor Ken Froot and State Street Associates Director Paul O’Connell, the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors.
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CIBC Mellon adopts EquiLend
To improve efficiency and increase revenue potential, CIBC Mellon will be implementing EquiLend’s suite of services. EquiLend has recently received regulatory approval from the Investment Industry Regulatory Organization of Canada to operate as an alternative trading system in Ontario.
The EquiLend platform automates formerly manual trading and post-trade processes.
“By introducing EquiLend’s AutoBorrow and Trade2O capabilities to our desk, securities borrowers can expect to enjoy more efficient lending through a familiar interface, and we expect this will drive higher lending volumes for our clients,” says James Slater, senior vice-president and head of capital markets with CIBC Mellon.
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Safe funding status a minority
U.S. multi-employer pension plans are still reeling from the global financial crisis, with nearly three-quarters (73%) of plans reporting they are less than 80% funded, according to a survey.
The International Foundation of Employee Benefit Plans’ (IFEBP) Multi-employer Pension Funding Status and the Freeze Decision survey of 213 pension plans found that only 27% of respondents reported they held a safe status, compared to 75% the year prior.
A plan is considered to have a safe status if it is at least 80% funded.
“The number of plans reporting an endangered or critical status has almost tripled,” says Julie Stich, senior information/research specialist with the IFEBP. “These plans must now decide between taking immediate steps to improve their funding or taking the one year funding status freeze.”
Under the Pension Protection Act of 2006, plans certified as endangered must create a funding improvement plan, while those certified as critical must create a rehabilitation plan. To provide DB plans temporary funding relief, the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) provides an alternative option—taking a one year funding status freeze.
Fifty-four percent are taking advantage of the freeze option, while 25% have decided not to take the freeze option. For the remaining 21%, the option is not applicable because their 2009 status remained the same as their 2008 status.