Tag: Andrea Riquier

Public pensions don’t have to be fully funded to be sustainable, paper finds

Mary Pat Campbell

Link: https://www.marketwatch.com/story/public-pensions-dont-have-to-be-fully-funded-to-be-sustainable-paper-finds-11622210967

Excerpt:

Governments “don’t have to pay off their debt like a household does,” said Louise Sheiner, policy director for the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “They can just keep rolling it over. They’re never going to go out of business and have to pay all at once.”

Sheiner is co-author, along with Jamie Lenney of the Bank of England, Byron Lutz of the Federal Reserve Board of Governors, and Brown University’s Finn Schüle, of Sustainability of State and Local Government Pensions: A Public Finance Approach, which was presented at a Brookings conference in March.

State and local liabilities can also be likened to the federal government’s deficit and debt, Sheiner said in an interview with MarketWatch. Most economists think that as long as those numbers stay constant as a share of the economy, it’s not problematic.

Author(s): Andrea Riquier

Publication Date: 2 June 2021

Publication Site: Marketwatch

Public pensions won’t earn as much from investments in the future. Here’s why that matters

Mary Pat Campbell

Link: https://www.marketwatch.com/story/public-pension-systems-dont-think-theyll-earn-as-much-from-investments-heres-why-that-matters-11620674757

Graphic:

Excerpt:

State pension systems dropped the rate of return they assume for their investment portfolios again, continuing a two-decade long trend that public-finance experts say is necessary, even as it presents some challenges for the entities that participate in such plans.

The median assumed return in 2021 is 7.20%, according to a report published early in May by the National Association of State Retirement Administrators, down roughly 1 percentage point since 2000, as the investment managers charged with managing trillions of dollars for municipal retirees have adapted to a more challenging market environment.

Author(s): Andrea Riquier

Publication Date: 11 May 2021

Publication Site: Marketwatch

With lower returns on the horizon, public pensions will turn to riskier assets, Moody’s says

Mary Pat Campbell

Link: https://www.marketwatch.com/amp/story/with-lower-returns-on-the-horizon-public-pensions-will-turn-to-riskier-assets-moodys-says-11614289692?mod=dist_amp_social

Excerpt:

State and local government pension systems are increasingly dependent on investment returns, and at risk of increasingly volatile results, as funding levels remain depressed and systems increasingly start to pay out more than they take in, according to a new report from Moody’s.

The credit-ratings agency anticipates higher volatility and lower returns across asset classes in 2021 compared to 2020, even as many pension sponsors have spent the past few years lowering their assumed returns from previous loftier targets that they rarely hit.

“With persistently low interest rates for high-grade fixed-income securities, public pension systems continue to rely on highly volatile equities and alternatives to meet return targets, posing a material credit risk for some governments,” the Moody’s analysts wrote.

Author(s): Andrea Riquier

Publication Date: 25 February 2021

Publication Site: MarketWatch