By Drew Carter www.pionline.com
The recent financial crisis drained retirement funds worldwide by $4 trillion, according to an estimate from the Organization for Economic Co-operation and Development.
The estimate was made Wednesday at an OECD seminar in Paris in a presentation by Pablo Antolin, principal economist, financial affairs division at OECD.
“The main message is that losses are substantial and dependent on the asset allocation of pension funds in a specific country,” Mr. Antolin said today in a telephone interview.
The estimate — that defined benefit and defined contribution plans lost the money from Jan. 1 to early November — was calculated by using OECD’s own asset allocation data by country as of Dec. 31 and applying global equities, bonds and cash index returns to those allocations.
Losses were highest in Ireland, the U.S. and the Netherlands, where exposures to equities were the highest at the end of 2007; pension funds in those countries lost 20% or more of assets on average, according to OECD’s website. Pension funds in Korea and Luxembourg, where equity exposures are very low, have experienced minor losses.
Funding levels have declined five to 15 percentage points on average, depending on the discount rate used, and the OECD expects that when year-end data is reported the figures will be worse.