Newsletters

Return assumptions need annual review

For pension funds, an unrealistically high assumption means they can contribute less each year than they will need to meet future pension obligations.

By Rich White | Updated on September 23, 2014

What is a realistic long-term rate-of-return assumption to use in planning for your clients? Whatever the answer, this is not a decision that should be put on auto-pilot. Each year, advisors should review with each client a portfolio return assumption that seems realistic and attainable, given current conditions and the client’s asset allocation.

Large U.S. pension funds are in a quandary because they have chosen overly-optimistic return assumptions, averaging about 8%, and funding pressures are making it difficult to reduce the rate to more reasonable levels. The largest U.S. pension fund, the $300 billion California Public Employees’ Retirement System, is deep into a review process that ultimately may reduce its assumption from 7.5% to 7.25%.

Complete your profile to continue reading and get FREE access to BenefitsPRO.com, part of your ALM digital membership.

Your access to unlimited BenefitsPRO.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

Critical BenefitsPRO.com information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events.
Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com

Already have an account? Sign In Now

NOT FOR REPRINT

Dig Deeper

Recommended Stories

Voters lock state benefits regulation trends in

Allison Bell | November 08, 2024

As the results turn Washington upside down, state capitals are purring along.

Retirement Savings for Americans Act: Increased access, but worse retirement outcomes?

Lynn Cavanaugh | November 08, 2024

The new retirement bill, aimed at expanding retirement coverage for workers not covered by an employer plan, would likely lead to worse retirement outcomes for most Gen Z and millennial workers, according to the Morningstar Center for Retirement's new research.

33,000 Boeing workers end strike: No pension in new contract, but 401(k) contribution boost

Lynn Cavanaugh | November 06, 2024

Retirement plans were a hot button issue for union workers, who wanted Boeing to bring back their lost pension plans, however, Boeing said they were “prohibitively expensive.”

Resource Center

Download this Q&A to learn about impactful trends, advice for plan sponsors and participants, and the role that Corebridge plays in moving financial futures forward for government plan sponsors and employees.

Information Brief

BenefitsPRO

Don’t miss crucial news and insights you need to navigate the shifting employee benefits industry. Join BenefitsPRO.com now!

Unlimited access to BenefitsPRO.com - your roadmap to thriving in a disrupted environment
Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
Exclusive discounts on BenefitsPRO.com and ALM events.