Tuesday, March 15, 2011

Will Government Pensions Need Bailouts?

According to PLI's news capsules,

State pensions are recovering as the stock market improves, but they still have a long road to financial health, says a recent report. State pension systems had a funding ratio of about 69% for fiscal 2010, an increase from the previous year's ratio of 65%, reports Wilshire Associates. Still, that's not near 2007's estimated average funding ratio of 95%. "The trajectory is up, albeit it's up off a pretty low base," said Steven Foresti, managing director at Wilshire. (From WSJ, March 7, 2011, by Jeannette Neumann)

Here's what really interesting: "Over the next decade, Wilshire projects public pension plans will have a median annual return on their assets of 6.5%." If major pension/hedge funds are predicting just 6.5%, it will be interesting to see the average return for non-institutional investors. Remember: to the extent these government pension funds fail to fully fund themselves, the taxpayer is on the hook for all payouts.

No comments: