A Pension Game of Risk: Key Issues Around the World

What is the Big Idea?

Ford and General Motors might be setting the new standard for U.S. companies when it comes to managing pension obligations. G.M. reduced its pension liabilities by $26 billion earlier this month by offering lump-sum payments to thousands of retired white collar employees to reduce its pension obligations, which are the biggest in the nation. 

Pension obligations have been a thorny issue for boardroom executives since the start of the millenium and the problem isn't limited to the U.S. The rest of the world feels the sting as well. 

Dr. David Blake, Professor of Pension Economics at Cass Business School, gave us a global perspective of the pension problems in the U.S., U.K, Canada, Holland and Ireland.

Watch Professor Blake talk about the key pension issues around the world:

What is the Significance?

Problems vary form country to country. And the solutions leave some of us better off than others. Canada and Holland both have better pension schemes and the U.S. will "end up with much lower pensions than Dutch retirees in 20 years time," says Dr. Blake.

Yet with all these varying issues and outcomes, they all have this in common: companies are pouring billions of dollars into pension schemes to fulfill its obligations, but persisting deficits means much of this financial support is all for nothing. 

The U.K.’s largest 350 companies put £20 billion ($31 billion USD) into their direct benefit (DB) schemes over the 12 months to March 2012, yet deficits increased by £17 billion, according to a Mercer report. At the end of 2011, the S&P 1500 companies contributed an additional $70 billion to their pension plans over the course of the year, yet deficits increased by $169 billion to reach $484 billion in the U.S. 

"This pattern repeats across all major developed countries as corporations do battle with a number of risks, which, left unmanaged, promise to threaten the future stability not just of their pension plans but of the very businesses that underpin them," says the report.

So how can company leaders manage pension risks and obligations? Frank Oldham, Senior Partner at Mercer tells us here. 

About “Inside Employers’ Minds”

 “Inside Employers’ Minds: Confronting Critical Workforce Challenges” features a dedicated website (www.mercer.com/insideemployersminds) which contains a number of resources focused on addressing each key issue.

Photo courtesy of Gunnar Pippel/Shutterstock.com.

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