Corporate Pension Picture Looking Brighter

[question everything]

Source: WSJ

Corporate pension plans are getting a shot in the arm from a surging stock market. Investments in the average company’s pension plan are expected to be at levels that cover 96% of future obligations at the end of the year, according to J.P. Morgan. Funding levels are up from 77% at the end of last year—a figure that was essentially unchanged since the financial crisis of 2008, the WSJ’s Gregory Zuckerman and Michael Corkery note.

The narrowing of the funding gap over the past year is the most dramatic since 1986. Stock-market gains account for about 60% of the improvement, while the rest has come from rising interest rates, which effectively reduce the value of future benefit payments to retirees. And the picture could brighten further next year. If yields on bonds continue to rise, corporate pensions could get more of a boost. That’s because funding levels are partly determined by interest rates on corporate bonds, which are used to value future retirement obligations.

The recovery is also giving companies new options, Zuckerman and Corkery write. Some are getting more flexibility because they don’t have to spend extra cash on pension contributions, while others may consider shifting their obligations to insurance companies. Companies could also follow the example of Ford and hand employees lump-sum payments. Pension decisions such as these are “on the radar screen of every person working on pension funds,” now that the plans are on firmer ground, says Karin Franceries, head of U.S. strategy at J.P. Morgan Asset Management, who works with corporate plans.


Read more: http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-403996/

[mitty14u2]

1. Ending the Stimulus - Bond Buying by the Fed

Look at the BIG (If )yields on bonds continue to rise, corporate pensions could get more of a boost. That’s because funding levels are partly determined by interest rates on corporate bonds, which are used to value future retirement obligations.

Bonds are free money from extremely low interest for banks feeding Wall Street in quantitative easing Stumulas!


End of Stimulus? What's Behind Fed's Surprise Statement

In a surprise move, several Federal Reserve members said they want to end quantitative easing this year, but analysts said that doesn't mean the central bank will make a major policy shift anytime soon.

The Fed sent ripples through financial markets Thursday when minutes of its Dec. 12 policy meeting showed that "several" members would like to stop the bond-buying program before the end of this year. (Read More: Some Members See QE Ending This Year)

http://www.cnbc.com/id/100352748

The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Baby Boomers

This article simulates how the shift from DB to DC pensions might affect the distribution of retirement income among boomers under two different pension scenarios: one that maintains current DB pensions, and one that freezes all remaining DB plans in addition to a third of all state and local plans over the next 5 years. The analysis uses the Social Security Administration’s (SSA‘s) Modeling Income in the Near Term (MINT) microsimulation model to describe the potential impact of the pension shift on boomers at age 67. The article examines both changes in retirement income and the numbers of winners and losers, and it compares these outcomes among individuals grouped by sex, educational attainment, marital status, race/ethnicity, years of paid employment, and quintiles of lifetime earnings and retirement income. Of principal concern is whether income from increased DC plan coverage will compensate for the loss of DB plan benefits.

http://www.decisionsonevidence.com/2013/01/the-disappearing-defined-benefit-pension-and-its-potential-impact-on-the-retirement-incomes-of-baby-boomers/

In another words what’s pumping up Pensions and Wall Street will end causing the markets to fall, by then the Banks should have refilled funds enough to go without stimulus, they will have to go back to normal banking. Like lending, instead of just hording. They will have to invest in private markets, if they don’t figure out a new Scheme to screw over the general public.