PERFECT STORM MEANS DB PENSION SCHEMES BECOMING TOO EXPENSIVE TO RUN - Next week's Budget will be closely watched for changes to pension schemes after a raft of new measures were introduced in recent years. More and more workers are joining defined contribution schemes now as an increasing number of more favourable - but expensive - defined benefit, or DB schemes, are wound up.
Nigel Aston, Head of Defined Contribution with State Street Global Advisors in the UK, said the decline of the define benefit scheme is a phenomenon that is happening all over the world. "We're seeing the same problems globally. People are living longer and retirement is getting more expensive to fund," Nigel Aston explained.
"We've all been through the same turbulent capital markets. Investment returns have suffered and we're in a low interest rate environment. It's a perfect storm and employers can no longer afford a DB scheme," he added.
A study by SSgA on attitudes to retirement and pensions found that only 13% of men and 5% of women are confident of achieving their retirement goals. "People think about their retirement plans fairly often and that number increases as people get closer to retirement. But they are not necessarily acting. Only 10% actually understand their fund," Nigel Aston says.
The pensions expert added that there was a general lack of understanding when it came to where people saved their money, with stocks coming bottom of the list despite some positive performance of late. "Putting it in a bank or building society was top of the list, so people clearly have short memories," he said. "Four out of five people saw investment in stocks as less risky than gambling. There's a disconnect. People are unclear on where their money should go," he concluded.
MORNING BRIEFS - Today is rates decision day in the UK where Bank of England governor, Mark Carney, is expected to leave things as they are. A surge in optimism had some worried that the new Governor would be forced to lift interest rates from their record low of 0.5% ahead of schedule, but patchy manufacturing and trade data suggest his caution is not misguided. 7% unemployment is the key figure at which Carney has said he will consider raising rates again.
*** A series of meetings will continue in Washington today as efforts intensify to find a solution to the US government shutdown and to raise the looming debt ceiling. House Democrats were invited to the White House yesterday and will be followed by House Republicans today. The president has promised to enter serious budget negotiations with legislators as soon as they re-open government and lift the debt ceiling. The shutdown - which enters day 10 today - is proving too much for one citizen who decided to mow the lawn himself at the Lincoln Memorial in Washington yesterday.
*** Those talks overshadowed the appointment yesterday of the first woman to lead the US Federal Reserve in its 100 year history. 67 year old Janet Yellen takes over the reigns from Ben Bernanke at an important juncture in the Fed's existence. Mr Bernanke had been expected to start trimming back on stimulus at the bank's last policy meeting a few weeks ago but he has now left that task to his replacement. Ms Yellen is seen as less likely to taper and may even add to the current $85 billion a month that is being injected into the financial system.
*** Public sector contracts or public tenders are worth an estimated €12 billion here and just one in ten Irish SMEs win those tenders. Businessman Tony Corrigan is launching a new outfit today called TenderScout which aims to help those small and medium enterprises get a bigger share of those contracts. TenderScout is an online platform and companies that used the service in its pre-launch phase improved their success rates from 10% to 80%.
*** The outlook for Irish business is continuing to improve with a significant increase in the number of companies reporting better activity levels in the past three months. That is according to the Autumn Business Sentiment Survey from KBC Bank and Chartered Accountants Ireland. Those businesses - nearly half of those surveyed - also expect the recovery to continue into the next quarter. Nearly three quarters saw the budget as being important to their prospects but they were more concerned about individual measures rather than the size of the overall adjustment.