Global Pension Risk Survey 2011 US and Europe Survey Findings
Continued market volatility, changing regulatory regimes, and maturing pension liabilities continue to push managing pension risk up the agenda of corporate executives. Aon Hewitt's global pension risk study looks at the pension risk management attitudes and actions of plan sponsors around the world, as well as providers of pension risk management solutions (including asset managers, banks, and insurance providers). By looking at multiple regions and perspectives, Aon Hewitt's study aims to provide comprehensive data on the latest thinking and practices in global pension risk management.
US Survey Findings:
For corporate defined benefit plans in the United States, the calamitous decade since the collapse of the tech stock bubble in 2000 marked a turning point. In 2010, large corporate plans are commonly closed to new entrants and many of those are completely frozen—committed to paying only those benefits earned by employees in past years. A decade of declining interest rates and low, single-digit equity returns finds most pension plans reporting sizable deficits. In many cases, their sponsors acknowledge that these deficits won’t go away on their own—large cash contributions will be required to fill them.
Given the current picture, it would be easy to miss the transformation that is occurring. Our 2011 Aon Hewitt US Pension Risk Survey finds this transformation taking place in the attitudes, strategies, and governance practices of plan sponsors. This transformation is taking place at plans large and small, underfunded and well funded, open, closed, and frozen. In our view, this represents one of the most important shifts in pension plan investment management practices since the 1980s.
Europe Survey Findings:
Our last Global Pension Risk survey in 2009, revealed a flurry of activity in the aftermath of the global financial crisis. The extreme volatility in funding levels (at one point during 2009, funding levels fell by 6% in one day!) saw plan sponsors considering an unprecedented number of activities, or potential activities, to manage their pension plan risk. The 2011 results paint a much more measured and reasoned picture of dealing with the continued pension deficits. Deficits continue to be persistent – pension funding levels across Europe in early 2011 were pretty much where they were in early 2010, at around 75%, having dropped as low as 65% towards the end of Summer 2010.