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Public Pensions Strengthened Their Funding in 2017
Source: National Public Pension Coalition

 

Public pension plans continued to improve and strengthen their funded status last year. That is the takeaway from a new report by the National Conference on Public Employee Retirement Systems (NCPERS). With many plans earning double-digit investment returns, pension plans took the opportunity to fortify their funded position for the long term.

The annual survey of state and local pensions by NCPERS found that most plans met or exceeded their investment return assumptions. On average, the surveyed pension plans reported 1 year returns of 7.8%, 5 year returns of 8.4%, and 20 year returns of 7.4%. As we’ve noted before on this blog, many public pension plans earned double-digit investment returns during 2017. Just this week, Oregon PERS reported earning 15.3%, more than double their expectations.

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Retirement Benefits
Source: Social Security Administration

Social Security offers an online retirement application that you can complete in as little as 15 minutes. It’s so easy. Better yet, you can apply from the comfort of your home or office at a time most convenient for you. There’s no need to drive to a local Social Security office or wait for an appointment with a Social Security representative.

In most cases, once your application is submitted electronically, you’re done. There are no forms to sign and usually no documentation is required. Social Security will process your application and contact you if any further information is needed.

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Why Have Interest Rates Fallen Far Below the Return on Capital
Source: Federal Reserve Bank of Chicago

 

Risk-free rates have been falling since the 1980s while the return on capital has not. We analyze these trends in a calibrated OLG model with recursive preferences, designed to encompass many of the “usual suspects” cited in the debate on secular stagnation. Declining labor force and productivity growth imply a limited decline in real interest rates and deleveraging cannot account for the joint decline in the risk free rate and increase in the risk premium. If we allow for a change in the (perceived) risk to productivity growth to fit the data, we find that the decline in the risk-free rate requires an increase in the borrowing capacity of the indebted agents in the model, consistent with the increase in the sum of public and private debt since the crisis, but at odds with a deleveraging-based explanation put forth in Eggertsson and Krugman (2012).

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Economic Outlook Symposium: Summary of 2017 results and 2018 forecasts
Source: Chicago Fed Letter

According to participants in the Chicago Fed’s annual Economic Outlook Symposium, the U.S. economy is forecasted to grow at a pace slightly above average in 2018, with inflation moving up a little and the unemployment rate remaining low.

The Federal Reserve Bank of Chicago held its 31st annual Economic Outlook Symposium (EOS) on December 1, 2017. More than 100 economists and analysts from business, academia, and government attended the conference. This Chicago Fed Letter reviews the forecasts for 2017 from the previous EOS, and then analyzes the forecasts for 2018 (see figure 1) and summarizes the presentations from the most recent EOS.

The U.S. economy entered the ninth year of its expansion in the third quarter of 2017. While the nation’s real gross domestic product (GDP) is at its highest level in history, the rate of economic growth since the end of the Great Recession in mid-2009 has been quite restrained. During the 33 quarters following the second quarter of 2009, the annualized rate of real GDP growth was 2.2%—just slightly above what is considered the long-term rate of growth for the U.S. economy.

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The Nation’s Retirement System
Source: U.S. Government Accountability Office

The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. Traditional pensions have become much less common, and individuals are increasingly responsible for planning and managing their own retirement savings accounts, such as 401(k) plans. Yet research shows that many households are ill-equipped for this task and have little or no retirement savings. In this special report, GAO examines these challenges, drawing from prior work and others’ research, as well as insights from a panel of retirement experts on how to better ensure a secure and adequate retirement, with dignity, for all.

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Illinois Ponders Pension-Fund Moonshot: a $107 Billion Bond Sale
Source: Bloomberg Markets

 

Lawmakers in Illinois are so desperate to shore up the state’s massively underfunded retirement system that they’re willing to entertain an eye-popping wager: Borrowing $107 billion and letting it ride in the financial markets.

The legislature’s personnel and pensions committee plans to meet on Jan. 30 to hear more about a proposal advanced by the State Universities Annuitants Association, according to Representative Robert Martwick. The group wants Illinois to issue the bonds this year to get its retirement system nearly fully funded, assuming that the state can make more on its investments than it will pay in interest.

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Gordon Telfer to be Keynote Speaker at the 2018 IPPFA Illinois Pension Conference
Source: IPPFA

 

Gordon Telfer to be Keynote Speaker at the 2018 IPPFA Illinois Pension Conference.

 

Gordon Telfer

Senior Vice President,
Client Portfolio Manager

Gordon is a client portfolio manager for the U.S. equity group, focusing on global equities. In this role, he works with portfolio managers to develop and communicate information about each strategy’s investment team, process and performance to institutional, retail and defined contribution analysts and advisers.

Gordon began working in the financial industry in 1986. He joined Nuveen Asset Management in 2012 as a client portfolio manager representing the firm’s global equity strategies. Prior to joining the firm, he was a managing director and director of global equities for RBC Global Asset Management. In this role, Gordon was responsible for managing the large-, mid-, small- and micro-cap equity teams and providing investment solutions to U.S. and international clients. He was also a member of RBC’s Investment Strategy Committee, which formulated macro investment strategies, and worked closely with the firm’s CIO to evaluate and adopt investment best practices. In addition, Gordon served at RBC as a portfolio manager on the large- and mid-cap growth equity team.

Previously, he worked at Alliance Capital Management as a senior portfolio manager with its large-cap growth team and a member of the company’s investment policy group. Gordon was also a senior vice president and global strategist at Scudder Kemper Investments. He began his career in the financial industry at Murray Johnstone International in Glasgow, Scotland.

Gordon has spoken at numerous regional and national conferences on various portfolio management topics and has frequently appeared on business programs on CNBC. A native of Glasgow, he earned a Stock Exchange Diploma from Heriot-Watt University in Edinburgh, Scotland.


 

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Welcome Swansea Fire Pension Fund to IPPFA
Source: IPPFA

Welcome Swansea Fire Pension Fund to IPPFA.

 

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New session will bring new efforts at pension reform
Source: The State Journal-Register

Illinois lawmakers are gearing up to start another spring session that will include more attempts to address an issue that has remained stubbornly elusive so far.

What can the state do to rein in the cost of public employee pensions and try to address the $129 billion debt faced by the five state-funded pension systems?

A number of ideas are floating around the General Assembly, from an idea to issue billions of dollars in bonds to pay off the existing debt at a lower interest rate, to an idea that would give some employees a cash incentive to accept smaller future increases in their retirement benefits after they retire.

As always, lawmakers will have to consider any changes with an eye to what the courts will find acceptable, given the pension protection clause in the state Constitution. There’s also the fact this is an election year when the Executive Mansion is at stake along with dozens of legislative races.

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National Retirement Risk Index Shows Modest Improvement in 2016
Source: CRR

 

The brief’s key findings are:

  • Between 2013 and 2016, the National Retirement Risk Index improved modestly, dropping from 52 percent to 50 percent of working-age households.
  • The improvement was driven mainly by rising home prices, with stock market gains also contributing.
  • At the same time, Social Security’s rising “Full Retirement Age” and declining interest rates served as a headwind against greater progress.
  • The bottom line is that retirement security remains a major challenge that requires today’s workers to save more and/or work longer.

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