The 2013/09/10 at 12:06
Absolutely mindblowing. The 9.8 % growth in value of these pension alternatives between 2011 and 2012, following a 2 % rise between 2010 and 2011, possibly signposts the start of a new era. Anglo-Saxon in origin, pension funds are a way to build up a handy and reassuring nest egg to meet the needs of old age. The system is simple: everyone saves up for their future retirement, building up their own pension savings during their working life.
In practical terms, an organism collects this money and invests it in the best possible market conditions. The organism may be the employee’s company or else an external specialised company implementing extremely active investment strategies. When the time comes, the retiree can recuperate the sum monthly or else in a single go.
American pensions par excellence
According to the magazine Challenges, this new growth in pension funds can be explained by the healthy performance of financial markets but also by new money being invested in the funds. Unsurprisingly, the top spot for these boosted pension schemes is still occupied by Japan, with over 1,300 billion dollars in assets invested.
While this system satisfies two-thirds of retirees in the United States, elderly people in France still rely on a distribution-based pension scheme. At a time when reforms to the French pension system are under discussion, Pierre Gattaz, Head of the MEDEF (French employers’ union) triggered debate when he made the following statement to the newspaper Le Monde this summer: “To have a dogma-free pension system, let’s introduce a dose of capitalisation.”
But for the moment, the French government does not really seem ready to take the plunge. Indeed, the Fonds de Réserve des Retraites (FRR or French Pension Reserve Fund) is represented in the Towers Watson ranking. But with only 48.3 billion dollars, France only comes in 68th on this market of the future.
A solution that will be outlived
Pension funds have become the target of investors. This month, Kodak sold its emblematic personalised imaging and document imaging businesses to a British pension fund to escape from bankruptcy.
Meanwhile, the US retailing chain Neiman Marcus is finishing up negotiations on its sale to the Ares Management and Canadian Pension Plan Investment Board.
Everything seems to hint that these pension funds are the miracle investment of the 21st century. But let’s not get too swept up by them all the same. According to Thierry de La Noue, Head of Investment Consulting at Towers Watson in Paris, “over a five year period, the annualised growth of funds is only an average of 3 %. When inflation is deduced, this will not be enough to cover the lengthening of the lifespans of future retirees if there is no new injection of capital.”