The New Mexico State Investment Council fired one of its investment advisers, Aldus Equity Partners, on Wednesday as the firm came under increasing scrutiny by investigators examining New York’s pension fund.
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New York attorney general Andrew Cuomo’s investigation into the state’s private equity investments has led to the indictment of the state pension fund’s former chief investment officer and a political adviser.
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If you didn't see CBS's 60 Minutes episode Sunday night on the trillion dollars lost in American 401(k) plans, click here to view. The main segment is about 13 minutes long and there are two shorter related clips.
While there's really nothing new in the show, it certainly has people talking: it shows several American couples in their 50s or early 60s who have experienced 40% losses in their nest eggs and have no expectation of ever recouping the losses. They're taking jobs as Starbucks baristas or grocery check-out clerks. One expert suggests that if they continue working for another ten years, the market "might" come back and allow them to experience their hopes for — as one couple put it — "a nice, quiet life" in a rural cabin somewhere.
The show is quite critical of the numerous fees incurred in 401(k)s — which are similar to Defined Contribution or group RRSP plans in Canada. In either case, the underlying investments are in the equivalent of mutual funds, with all the pluses and minuses that implies.
The Boomer Formerly Known as Wealthy?
The losses of 40 or 50% suggest to me that these investors were almost 100% in equities. One of the people interviewed attacks the victims, saying in effect that they should have known stocks go up and down and that the hope for the greater long-term gains of stocks must be tempered by the short-term reality they may go down as well.
The segment doesn't seem to talk much about asset allocation or the fact that a portfolio with 40 or 50% bonds would be down maybe only 20% — and recovering if the rally of the last six weeks is any indicator.
The show is nevertheless a good summary of where we've been: it says that more than US$2 trillion has been vaporized in pensions, at least $1 trillion of which was in 401Ks.
More evidence that the "wealthy boomers" addressed by this blog are no longer wealthy, or even hopeful that they may one day be so. Reader feedback welcome if this blog should be renamed The Boomer Formerly Known As Wealthy.
P.S. For a lively discussion of the show and CARP's proposal for a Universal Pension Plan in Canada, click here.
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If you didn't see CBS's 60 Minutes episode Sunday night on the trillion dollars lost in American 401K plans, click here to view. The main segment is about 13 minutes long and there are two shorter related clips.
While there's really nothing new in the show, it certainly has people talking: it shows several American couples in their 50s or early 60s who have experienced 40% losses in their nest eggs and have no expectation of ever recouping the losses. They're taking jobs as Starbucks baristas or grocery check-out clerks. One expert suggests that if they continue working for another ten years, the market "might" come back and allow them to experience their hopes for — as one couple put it — "a nice, quiet life" in a rural cabin somewhere.
The show is quite critical of the numerous fees incurred in 401Ks — which are similar to Defined Contribution or group RRSP plans in Canada. In either case, the underlying investments are in the equivalent of mutual funds, with all the pluses and minuses that implies.
The Boomer Formerly Known as Wealthy?
The losses of 40 or 50% suggest to me that these investors were almost 100% in equities. One of the people interviewed attacks the victims, saying in effect that they should have known stocks go up and down and that the hope for the greater long-term gains of stocks must be tempered by the short-term reality they may go down as well.
The segment doesn't seem to talk much about asset allocation or the fact that a portfolio with 40 or 50% bonds would be down maybe only 20% — and recovering if the rally of the last six weeks is any indicator.
The show is nevertheless a good summary of where we've been: it says that more than US$2 trillion has been vaporized in pensions, at least $1 trillion of which was in 401Ks.
More evidence that the "wealthy boomers" addressed by this blog are no longer wealthy, or even hopeful that they may one day be so. Reader feedback welcome if this blog should be renamed The Boomer Formerly Known As Wealthy.
P.S. For a lively discussion of the show and CARP's proposal for a Universal Pension Plan in Canada, click here.
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The move to ban intermediaries and lobbyists from helping steer investments from the pension fund follows investigations into millions of dollars paid to politically connected placement agents.
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ALBANY, N.Y. (AP) — New York Comptroller Thomas DiNapoli says he has banned middlemen and lobbyists from helping steer investments from the state pension fund.
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NEW YORK (Reuters) – New York City’s pension funds are probing whether private equity fund Quadrangle “intentionally misled” it about placement agents used to win pension fund business, a spokesman for the city’s comptroller said Tuesday.
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The over-50 lobby group known as CARP today told the government it should consider establishing a Universal Pension Plan modelled on the CPP, with mandatory enrolment, a payroll deduction mechanism and a performance-oriented mandate that is independent from government or any single employer.
Speaking in Ottawa this morning before the House of Commons Standing Committee on Finance, CARP vice president of advocacy Susan Eng said the economic crisis has hit retirees especially hard and that "the current pension system fails to adequately provide for our retirement security." While those fortunate enough to have RRSPs or employer-sponsored Defined Contribution plans have seen their retirement savings evaporate, almost 30% of Canadian families don't have any retirement savings at all, Eng said.
CARP released a poll of 3,700 of its members and found "overwhelming support for a universal pension plan" for the roughly one in three Canadians without retirement savings. CARP is also calling for a Pension Summit that would include First Ministers and Finance Ministers. Pension reform can no longer be the "quiet preserve of pension experts," Eng said, "Canadians are looking to all levels of government for bold leadership to ensure hat protection of their retirement security remain the top public policy priority."
CARP cites a C.D. Howe Institute estimate that 3.5 million Canadian workers — or 25% of the workforce, mostly middle-income, working for smaller employers — are most likely to be on "an inadequate retirement savings track" and would thus benefit from access to a supplementary pension plan. C.D. Howe has suggested the creation of a new savings vehicle called the Canada Supplementary Pension Plan, or CSPP.
Features of a UPP
CARP says pension experts agree retirement income from all sources must replace between 60 and 70% of working income. Currently, the CPP provides at most 25% of Year's Maximum Pensionable Earnings (YMPE): $46,300 in 2009. Thus, for those without employer-sponsored private pensions, the maximum CPP benefit this year is $10,905.
CARP suggests gradually phasing in a UPP so that coverage would eventually cover 70% of pre-retirement income to a maximum pensionable earning limit of $116,667 (which is the 2009 limit for Registered Pension Plans). Like the CPP, the UPP would be a mandatory enrolment plan. CARP is wary of any version that would let individuals "opt out."
CARP has 330,000 members. In March, it made a joint submission on Private Pension Reform jointly with the Common Front for Retirement Security, which includes 21 organizations representing 2 million Canadians. CARP says there are 14.5 million Canadians 45 years of age or older, representing 42% of the total population. There are 4.6 millon Canadians over age 65, making up 13.3% of the population.
Canada's savings shell game
Coincidentally, the Post's lead editorial today (Tuesday) was entitled Canada's savings shell game. It points out that workers who counted on the "pension promise" from long years at a single employer are in danger of being short-changed in the case of corporate bankruptcy. The more money you can put into an employer-sponsored pension, the less you can save in an RRSP. This is the Pension Adjustment, a number that appears on your T-4 slip and which you enter when you're preparing your annual tax return. The one point not made by the editorial writer is that there may be recourse to a PAR, or Pension Adjustment Reversal but the problem there is you still need the money to make a giant catch-up RRSP contribution.
Meanwhile, by overtaxing "safe" interest income, we are tempted to put money into riskier equities which are taxed less harshly — but can generate huge losses, as many have suffered in their non-registered portfolios the last year.
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LONDON (Reuters) – European pension funds continued to increase their allocations to alternative assets such as hedge funds and commodities last year, undeterred by the financial crisis, according to a report.
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NEW YORK (AP) — The pension funds of the Service Employees International Union on Monday asked 29 financial services firms including AIG and Citigroup to investigate bonuses paid to top executives since 2005 amid fallout from the credit crisis.
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