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News : International Last Updated: Jun 23, 2010 - 9:12:29 AM


Markets News Afternoon: Most Irish pension funds are in deficit; Private sector workers lucky to have pensions face reduced benefits
By Finfacts Team
Jun 22, 2010 - 5:30:36 PM

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The Pensions Board today warned that the minority of private sector workers who have occupational pensions, face the prospect of lower retirement incomes because their pension funds are in deficit.

Launching the Board's 2009 Annual Report, Chairman Tiarnan O'Mahony said that while pension funds had performed strongly last year, this had not offset the very significant investment losses incurred in 2007 and 2008. About 75% of defined benefit schemes - which are viewed as the safer pension funds - - are in deficit. Some of those deficits are substantial.

Speaking at the launch, the Chief Executive of The Pensions Board, Brendan Kennedy said: "Trustees who fail to submit a funding proposal by the revised deadline may be liable to prosecution and the Board may issue a direction to trustees to reduce scheme benefits in such circumstances."Kennedy went on to stress: "It is important for trustees of defined benefit schemes in deficit to take the difficult decisions and make realistic choices to secure the long term viability and affordability of their schemes.’"

"Although investment returns for 2009 provided some relief for pension scheme members, there are concerns about how these returns were achieved.  Pensions Board data shows that the level of investment risk being taken is still very high.  Irish pension schemes suffered serious losses between 2007 and early 2009 because of the substantial investment risks being taken. 

Kennedy continued: "The lessons of the past are clearly still not being applied today; investment strategies must focus on the risk as well as the return. And the situation with defined contribution schemes is similar: there is very little risk reduction in the funds in which many members are invested.  Recent stock market losses show the ongoing risks of this approach. It is difficult to avoid the conclusion that the good investment returns of 2009 are a result of the same strategies that caused much of the recent losses, and that the chances of further losses are therefore too high. While under the Act, the Pensions Board does not have the power to specifically direct pension investment the Board continues to warn against this approach."

Annual Report and Accounts 2009  (pdf 613.9 KB)

Debating whether US housing can rebound without government aid, with Shari Olefson, real estate attorney and Stephen Meister, real estate attorney:

US Markets

In New York Tuesday, the Dow rose 4 points or 0.04% to 10,447.

The S&P 500 dipped 0.06% and the Nasdaq added 0.47%.

US second-hand home sales fell in May; Foreclosure/bank sales amounted to 31% of total sales

US second-hand home sales fell in May; Foreclosure/bank sales amounted to 31% of total sales

 

Live US Indices

Discussing the US dependence on petroleum and the plan to end that threat through the electrification of the ground transportation system, with Fred Smith, FedEx chairman & CEO:

UK Budget: VAT is to rise from 17.5% to 20% in January as Chancellor George Osborne unveiled the biggest package of tax increases and spending cuts in a generation. Ex-health, budgets of government departments to be cut 25% in real terms in 4 years.

UK Budget: VAT to rise to 20%; Ex-health, budgets of government departments to be cut 25% in real terms in 4 years

Hetal Mehta, senior economic advisor to the Ernst & Young comments on the Chancellor's Budget: "This package is much tighter than most had envisaged, with an extra tightening worth £40 billion a year by the end of the Parliament on top of the £44 billion built into the previous governments fiscal plan. We feel that the objective to eliminate the cyclically-adjusted current deficit by 2014-15 is quite ambitious, but commendable.

"With fiscal policy much tighter, one would expect a slower economic expansion, which is what the revised OBR projections show. This consistency is heartening and safeguards the credibility of the new framework. The pace of tightening announced should placate the markets.

"However, while the overall borrowing projections give us an idea of how fast the government intends to tighten policy in the coming years, without the publication of the Departmental Expenditure Limits, it is difficult to assess the credibility of that intention. Most departments will face a 25% cut, while others, notably health and education are likely to fare better, but we cannot say for sure at this stage.

"Overall, it was a well crafted and balanced Budget."

The pan-European Dow Jones 600 declined 0.64% Tuesday.

The ISEQ dropped 1.41%.

CRH is down 2.65%; Elan has risen 1.41%; AIB dipped 7.66% and BoI fell 7.29%.

Businessman Denis O'Brien has increased his stake in Independent News & Media to 20.2%.

In April it was announced that O'Brien's stake stood at 18.6%, making him a larger shareholder than Sir Anthony O'Reilly.

INM shares fell 1.25%.

European Benchmarks

Irish Share Prices

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Oil

On the New York Mercantile Exchange, oil for July 2010 delivery is trading at $77.78 down 4 cents from Monday's close. In London, Brent crude for July delivery is trading at $78.69 a barrel.

Currencies

The euro is trading at $1.2283 and at £0.8283.

For live currency updates, check the right-hand column of the Finfacts home page. The dollar traded at a record low $1.6038 per euro on July 15, 2008.

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