US public pension funds face big losses

Public pension funds in US states are facing their worst year of losses in history, exacerbating existing funding shortfalls and putting pressure on state governments to shore them up.

In the nine months to the end of September, the average state pension fund lost 14.8 per cent, according to Northern Trust, a fund company. The loss has grown since, as financial markets slumped further in October. The previous highest loss for state funds was 7.9 per cent for the full year in 2002.

California’s Calpers, the US’s biggest pension fund, last week reported a loss of 20 per cent of its assets, or more than $40bn, between July 1 and October 20 this year.

State and local pension funds comprise a patchwork of 2,700 funds that manage $1,400bn on behalf of 21m employees, including teachers, firefighters and other municipal workers.

About 40 per cent are underfunded, meaning that they would not be able to pay the future pensions that employees have been promised. State governments have lifted pension benefits – a move that is politically popular – but have often failed to put in more money to pay for them.

Richard Daley, mayor of Chicago, this year convened a taskforce to address the shortfalls in Illinois funds. For example, funding for the Police Fund has fallen to less than 50 per cent.

A Chicago police officer told the Financial Times: “We are risking our lives here every day, but we have no idea if the pension we have been guaranteed will be there when we retire.” The officer called on the city to start contributing more to the fund.

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Millions more face big energy price increases

· Up to 34% rise as last two big suppliers get into line
· Government urged to act as more face fuel poverty


Photograph: Steve Taylor/Getty Images

This summer’s misery for energy consumers reached a climax yesterday when the last two of the big six suppliers raised prices for millions of household customers.

ScottishPower, which has just over 5 million customers, said gas bills would rise by 34% from the beginning of next month, and electricity by 9%. Npower said it was putting up gas prices by 26% and electricity by 14% for its 6.6 million customers with immediate effect.

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Pension plans suffer huge losses

Report says weak markets, credit crunch have drained $280 billion from plans of largest U.S. companies

NEW YORK (CNNMoney.com) — Falling stock markets around the globe and the credit crunch are putting the pension funds of some of the largest U.S. companies into deeper financial holes, according to a report released Monday.

Since the credit crunch hit last fall, pension plans funded by S&P 1500 companies have lost about $280 billion in assets, according to an actuary at Mercer, a human resources consulting firm.

On paper, the losses from last October tally $160 billion. However, according to Mercer actuary Adrian Hartshorn, the asset losses are closer to $280 billion when pension plan assets and liabilities are considered together. The losses amount to about 7% of a total $4 trillion in pension plan assets.

Companies should be concerned, he said, because – assuming no change in the market – a typical U.S. company can expect their pension expenses to increase between 20% and 30% in 2009. That’s due to the higher cost of servicing the pension plan’s debt and the smaller return from the plan’s assets.

“I think it’s important for corporations to be aware of what’s going on in their pension plans, as corporations would be concerned when any part of its business is performing badly,” Hartshorn said.

According to the report, the total losses on pension assets and liabilities from the last day of 2007 through the end of June has grown to more than $80 billion.

Part of the loss has been reflected in companies’ current financial statements, but many losses incurred since the end of 2007 have yet to hit company balance sheets.

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City Pension Funds Lose Billions

Taxpayers Could Be On the Hook

New York City officials are bracing for increased pressure on the budget as the city’s pension funds are reeling from the credit crisis and posting billions of dollars in losses. In the nine months leading up to March 31, the city’s five pension funds lost a total of nearly $5 billion, or 4.4%, according to data from the city comptroller’s office. This is a far cry from projections published as recently as last month, when budget planners assumed the pension system would post no losses.

If those losses are not recovered by the end of the fiscal year, which ends Monday, the city will have to pay out several billion dollars through 2015, with the first payment of $190 million set for 2010.

The government will have to make up the shortfall from the poor performance of the pension funds at a time when it is already suffering from tax revenue losses due to a souring economy.

“In itself, it’s manageable,” the research director for the Citizens Budget Commission, Charles Brecher, said of the pension fund losses. “The fact that it’s going to be combined with revenue shortfalls means that we’ve got serious problems.”

The Teachers’ Retirement System of the City of New York, which has lost 5.06% of its value in the nine months ending March 31, has been the worst performer so far this year. The New York City Employees’ Retirement System, which lost 3.98% in the same period, performed the best. Other pension funds include the New York City Police Pension Fund, the New York City Fire Department Pension Fund, and the Board of Education Retirement System of the City of New York. Numbers for the state pension system are not yet available, a spokesman for the state comptroller said.

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Growing Deficits Threaten Pensions

Accounting Tactics Conceal a Crisis For Public Workers

The funds that pay pension and health benefits to police officers, teachers and millions of other public employees across the country are facing a shortfall that could soon run into trillions of dollars.

But the accounting techniques used by state and local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay the freight, according to a growing number of leading financial analysts.

State governments alone have reported they are already confronting a deficit of at least $750 billion to cover the cost of the retirement benefits they have promised. But that figure likely underestimates the actual shortfall because of the range of methods they use to make their calculations, including practices that have been barred in the private sector for decades.

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The REAL cost of inflation

The Daily Mail’s Cost of Living Index reveals food prices rising at SIX times official figure

The true, devastating scale of rising prices is revealed today – by the new Daily Mail Cost of Living Index.

It shows that families are having to find more than £100 a month extra this year to cope with increases in the cost of food, heat, light and transport.

According to the Consumer Price Index, inflation is running at only 2.5 per cent.

Yet the Mail’s index finds that food costs alone are rising at 15.5 per cent a year – more than six times the official rate.

And there are double-digit increases in other “must-pay” essentials such as petrol, gas and electricity.

Many families need to find more than £1,200 extra a year just to stand still.

Once higher mortgage costs are added, millions are having to pay out at least another £2,000 a year to keep their heads above water.

The Bank of England’s chief economist Charlie Bean admitted last night that higher food and energy costs are likely to push the Consumer Price Index over 3 per cent this year.

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