PENSIONSBENEFIT.COM: July 2016

Friday, 29 July 2016

Double pensions: Nigerians react

Chairman, Presidential Advisory Committee Against Corruption, Prof. Itse Sagay (SAN)

Senior Advocates of Nigeria, public affairs analysts and pension experts comment on the collection of double pensions by some serving public office holders

One could get pensions from two different sources. If a person works for a public institution, retires and joins a private organisation and retires, he can get pensions from both organisations. But if the two places are public institutions, it is wrong. What the person needs to do is to merge his service so that he can get a single pension. Most times, this is caused by ignorance. If one works in two public service institutions, one is supposed to merge them so that one can receive a single pension.

You would be surprised that the person would earn more if he merges the two. This is because pension is determined by the number of years in service. It may not necessarily be a crime. If somebody collects pension from a state and another from the Federal Government, there is no conflict. Where conflict may arise is when he collects pension from the Federal Government and salary from the same government. One cannot earn two incomes from the same government at the same time.- • Prof. Itse Sagay (Chairman, Presidential Advisory Committee Against Corruption)

I think it is something the Revenue Mobilisation Allocation and Fiscal Commission should sort out. But I consider it immoral for a public officer to take pensions from two public sources or collect pension and salary from two public institutions that are under the control of the Federal Government. That should be considered as corruption.

Unfortunately, those who benefit from the system have found their way into the institution that should address the issue. Some of those people are in the National Assembly. That puts us in a tight situation. I only hope that Nigerians would one day confront the National Assembly about the situation.

What the lawmakers are doing is immoral and evil. I think it would end when Nigerians choose to take back their country. From what has happened in recent months, I don’t see the current National Assembly doing what is required to develop the country. And if we leave the National Assembly alone, I do not see the country going anywhere.

People argue that one can collect pensions from state and federal government at the same time. That should not be. What governors and president, whether serving or former, earn is fixed by the RMAFC. That is the central body that fixes the salaries of all public officers.

The salaries of governors, ex-governors, the President, ex-presidents, state lawmakers, federal lawmakers and local government chairmen are fixed by the RMAFC. If the RMAFC says that an ex-governor who is in the Senate cannot earn salary in his current position because he collects pension as an ex-governor, there is nothing anybody can do about it. Where we should tackle the problem is at the RMAFC level.

Unfortunately, the only body that should oversee the commission is the National Assembly. Since the lawmakers are the ones indulging in the act, why would they move against what the commission is doing? My position is that sovereignty resides with the people and the National Assembly. The National Assembly uses delegated sovereignty. So, if it refuses to do what the people want, the people can take back their sovereignty. While the National Assembly oversees the executive, the people, in turn, could check the National Assembly. If Nigerians demand that the National Assembly should do the right thing, the National Assembly does not have a choice. But the challenge is that the people have decided to sit back and watch. Nobody takes responsibility by asking the National Assembly to do the right thing.- • Collins Okeke (National Coordinator, Human Rights Law Service)

An individual cannot collect pensions from two different institutions that are funded by the same government. Doing so is tantamount to stealing. It is like what many people do overseas. They register with different local governments to collect welfare allowances. It is stealing and punishable under the law for public officers to collect pensions from two sources. It is the highest level of fraud.

It is also wrong for an ex-governor who serves in the Senate to collect salaries and pension at the same time. There are some lawmakers in the National Assembly, who had served as military administrators and as civilian governors. For such people, drawing multiple incomes from the Federation Account is wrong. It constitutes a drain on the public purse and it should not be allowed to continue because it is unfair to Nigerians.

Public officials who have served in multiple capacities should not collect salaries and pensions from multiple sources. Such persons should let go of their former official incomes and stick to the present one they are receiving, that is, if they prefer their present incomes to the past. The law should not spare people who receive salaries and pensions from multiple sources because it is absolutely criminal. If they prefer their current salaries and allowances, they should forgo their pensions.- • Pastor Adedeji Adeleye (Executive Director, Independent Advocacy Project)

I believe it is not proper. I have taken somebody to court over the matter; I hope my opinion does not affect the court proceeding. I believe it is not proper for an individual to collect pensions from two different public institutions. If you look at the Code of Conduct for Public Officers, you would know that it is a practice that is prohibited.

To avoid this conflict, we should enforce existing laws. We have laws, but poor enforcement is a challenge. It is difficult to try a ‘big man’ in Nigeria. Everybody sees prosecution for corruption as political persecution. Nobody wants to do the right thing. But we can stop the problem by enforcing existing laws. –• Rotimi Jacobs (A Senior Advocate of Nigeria)

Well, it depends on the angle one looks at the issue. Viewed from the principle of natural entitlement, it is justifiable – considering the fact that both incomes are earned. Take for instance, a retired permanent secretary who is now a governor or a senator, such a person could earn incomes from two sources. His pension is his legitimate pay, coming from years of contributory scheme from his salaries and government. It is envisaged that after retirement, he would be too old to engage in any economic activity. So, the money is earned.

No law prevents an individual from engaging in another economic activity after retirement if one has the ability to do so. The retired permanent secretary, in the example given, could have chosen to be a contractor, or do another business to earn more incomes. Is it fair to stop the individual’s legitimate pension just because he is now earning money from his extra effort? That would be both immoral and illegal. The same thing applies to a scenario where a retired permanent secretary holds a public office, which has legally-approved pay package.

But looking at the issue from the point of sacrifice and statesmanship, one could advise based on morality. In this case, the public servant involved should let go of one of the revenue streams to free up funds for other pressing public matters. This is even more important during an economic meltdown like the one the nation currently faces. In a situation where many public workers are owed salaries that run into several months, it is not morally justifiable for a public servant to earn two streams of income from government.

The worst scenario has to do with senators who are former governors. They earn pensions as ex-governors while being paid regular salaries as senators. This should be looked into and the appropriate laws should be made to reverse the trend. Unfortunately, those who are supposed to make such laws are the beneficiaries of the immoral act.- • Akemokue Lukman (Executive Director, Trade and Investment, Edo State Governor’s Office)

Collecting pensions from two government offices is not in order. That is what I can say on the issue. But one has to find out the truth about the allegations against some public officers before one could make a specific comment. In general terms, I believe things should not happen that way; it is not a normal order.

As I said earlier, one would be able to make a clear statement on what needs to be done after studying the issues.

The Pension Reform Act 2014 covers almost everything about pension. There may not be any need for reforms now. Further reforms may come much later if we have any need for them. But we do not need them now; the current law is capable of addressing the current challenges.- • Susan Oranye (Executive Secretary, Pension Fund Operators Association of Nigeria)

(Compiled by Geoff Iyatse)

source: punch

Thursday, 28 July 2016

A Zappos employee had the company's longest customer-service call at 10 hours, 43 minutes

Zappos employee Steven Weinstein

(Zappos employee Steven Weinstein, shown here in the retailer's Las Vegas headquarters, holds the record for longest Zappos customer-service call.Zappos)

A Zappos employee recently had a customer-service call that lasted 10 hours, 43 minutes, breaking an internal record at the Amazon-owned online retailer.

On June 11, in Zappos' Las Vegas headquarters, Steven Weinstein answered a call from a customer who needed some help with an order of a few items. The two began to chat, and even after she was helped, she stayed on the line.

"It was excellent — the connection was amazing, and even though I never spoke to this customer before in my life I felt like I knew her for 15 or 20 years," Weinstein told Business Insider in an email. "It was just natural and time was flowing — it felt like it was effortless."

Weinstein said he took only one break during the nearly 11-hour period, about 2 1/2 hours on, to go to the bathroom. One of his colleagues brought him food and water during the call.

Zappos is an online store that sells shoes and apparel, which on its own isn't very exciting. That's why Tony Hsieh, who has led the company as CEO since 2000, decided from the beginning to make customer service the company's main product. The thinking was that customers could buy shoes anywhere, but they would become loyal to an online store if it went the extra mile to please them.

Hsieh's guidance resulted in an obsession with pleasing the customer, and call-center employees were encouraged to stay on the line for as long as necessary. Another of Hsieh's tenets is to "create fun and a little weirdness," and when employees combined this with customer service it resulted in employees going on marathon calls.

At Zappos, call-center employees are trained to use interactions with customers as a way to build relationships, not make a sale. And if a call is going long during a particularly busy time, then it's up to the employee overseeing the call center to assign more people to calls rather than to encourage an employee to end a call early.

The record that Weinstein broke was set by Mary Tennant in 2012 at nine hours, 37 minutes. Weinstein said he didn't stay on the line for so long "just for the sake of breaking" the record — he wanted to impress his customer.

"The connection was so strong that we could have talked for 18 hours if we really wanted," he said.

Culled from Business insider

Wednesday, 27 July 2016

Retirement at Age 80? How This Could Happen to You -Megan Elliott

Retirement piggy bank | Source: iStock

Eighty is the new 65, at least when it comes to retirement. More than a third of middle class Americans surveyed by Wells Fargo said they’d need to work until age 80 or beyond before they could retire comfortably. For young workers, retirement after 70 may be the norm. The average member of the class of 2015 will need to work until age 75, an analysis by financial website Nerdwallet found. Some may end up working until they hit their eighth decade, which could give them just a handful of years in retirement. (The average 23-year-old today can expect to live into their early to mid-80s.)
Many Americans have come to accept the inevitability of a late retirement. Since 1991, the number of people who expect to retire at or before age 65 has fallen from 84% to 46%, according to the Employee Benefit Research Institute (EBRI). Twenty-five years ago, 9% of people expected to work past age 70. Today, 26% do.
Anticipating a retirement date in your 70s or 80s isn’t necessarily a bad thing if you love your job. But for many, delayed retirement won’t be a matter of choice. Millennials will have to stay in the workforce longer because high student debt, rising rents, and a hesitancy to invest will make it difficult for them to save enough money to quit their jobs, according to NerdWallet. Many other workers find themselves reaching 60 or 65 with paltry nest eggs and big expenses, like mortgage payments or college for the kids, still hanging over their heads. Those financial pressures leave many no choice but to stick it out at the office for a few more years until they feel retirement is within reach.

Why Americans are delaying retirement

Retirement ahead | Source: iStock

Who’s to blame for our ever-increasing retirement age? A number of factors are at play. Pensions have largely disappeared, leaving workers to figure out how to fund their retirements on their own. Many people don’t have access to retirement plans at work, which makes it harder to save.

Stagnant wages are also a problem for people who want to save. In 2013, middle-income workers were earning just 6% more than they did in 1976, an increase of less than 0.2% per year, according to the Economic Policy Institute. For others, the very idea of retirement has changed. Rather than rounds of golf and long RV trips, they might be open to the idea of a phased retirement, or willing to put off retirement in exchange for better work-life balance during their younger years.
Human error is also contributing to rising retirement ages. From not saving enough to raiding retirement accounts too soon, it’s easy to make mistakes that may force you to put off retirement until your 80s. Here are three of the biggest.

1. You start saving too late

Procrastination is the enemy of success. If you wait until your 40s or 50s to start saving for retirement, you’re going to find it much more difficult to save enough money to maintain your current standard of living after you quit working.
“Consistently saving from the start of one’s working life is the key to creating retirement savings,” Joe Ready, head of Wells Fargo Institutional Retirement and Trust, said.
Don’t believe us? Just take a look at this chart from J.P. Morgan Asset Management. Consistently saving $10,000 a year from age 25 to 65 yields a nest egg of $1.8 million, assuming a return of 6.5%. If you wait until 35 to start saving the same amount, your portfolio will be worth almost $1 million less at retirement.

Source: J.P. Morgan Asset Management

2. You borrow from your retirement account

Broken piggy bank | Source: Thinkstock

Twenty percent of Americans admit to raiding their retirement account early, a 2014 Gallup poll found. Sixteen percent took out a 401(k) loan, and 9% made an early withdrawal. Doing either does huge damage to your retirement savings, as the chart below shows.

Source: J.P. Morgan Asset Management

With steady contributions of 9% of your annual salary, you’d be on track to have a retirement nest egg of $1.7 million at age 65. But once you take two relatively small loans of $10,000 each, plus an early withdrawal of another $10,000, your portfolio’s value falls to $1.2 million, a drop of 30%. When you tap your 401(k) early, you’ll probably cut back on contributions as you pay back the loan, as well as lose out on any future growth of the investments you sold, which causes you to fall behind in your savings, financial advisor Ric Edelman explained to CNBC.

3. You don’t save enough

Saving something for retirement is better than saving nothing in retirement. If you’re young and feeling other financial pressures, you may start out by saving just 2% or 3% of your salary. That’s a good start, but it’s a far cry from the 10% to 15% financial planners recommend setting aside, even if your employer matches your contributions. Gradually increasing your savings amount can make it more likely you’ll retire at 65 rather than 80.
How much of a difference does aggressive saving really make? A 25-year-old man making $40,000 a year who saves 3% of his salary annually has a 58% chance of not running out of money in retirement, according to EBRI research. If he increases his savings rate to 6.4%, he has a 75% chance of not going broke in retirement. And if he sets aside 14% of his salary, as many financial experts would suggest, he has a 90% chance of meeting his financial needs in retirement.

Culled from Money & Career Cheat Sheet:

Friday, 22 July 2016

Nigeria’s Pension Industry is Safe – Modibbo

The Managing Director and CEO of one of Nigeria’s licensed Pension Funds Administrators (PFA), Sigma Pensions, Alhaji Umar Modibbo, has said that the contributive pension scheme industry in Nigeria is safer due to the policies that have been implemented in the sector which makes the services sustainable.
He however called for expansion of the coverage saying the regulatory body is trying to improve on mini or micro pension schemes so that more people can be served under the scheme.
Modibbo said this at the sidelines when Sigma Pension hosted three Nigerians, from Niger Delta and Oyo states that won iPads and other items as prizes because of their participation in a survey that was conducted by the PFA in Abuja.
“After 11 years in the market and with the challenges in the market, I can say that the industry and the business is very much sustainable, contributive pension scheme is much safer and well structured in a way that it is much more sustainable.
“What the industry needs now is expansion of coverage which the regulator is trying to do by initiating mini pension scheme or micro pensions as they call it. When it comes into stream, more people can now be served, under this new pension scheme” he said.

Culled from naij.com

Wednesday, 20 July 2016

Stanbic IBTC Pension Pays N200bn to Retirees -James Emejo

The Chief Executive, Stanbic IBTC Pension Managers Limited, Mr. Eric Fajemisin said the bank has till date disbursed over N200billion as monthly pension to retirees under the contributory pension scheme (CPS).

He also said the company has continuously kept to its promise of ensuring that retirees get their benefits as and when due.
Speaking in Abuja at a pre-retirement forum for its customers, he stressed the need to build a relationship with customers as well as guide them in making wise decisions with their benefits.

Represented at the forum by the Executive Director, Investments, Mr. Oladele Sotubo, Fajemisin said: “As people head towards retirement, a decision about the type of life they wish to live in retirement should not be made from the hip, but rather through a well-structured financial planning process. The process, he said, should commence from the day one takes on a first job and involves setting aside part of current income into a retirement savings account.”

According to him, “Relationship is very key and these are our clients and so what this forum is actually tailored to achieve is to prepare our customers that are close to retirement- to prepare them as to what it takes, what they need to do and how they need to live after retirement.

“It’s always very important for us to plan. This money that we are talking about is something they’ve been putting aside right from when they got employed and when they were in service.”
At the forum, the company had outlined steps to help people make a successful transition to the next stage of their lives and have the dream retirement they desire.

It stressed that though people have the freedom to make choices about the kind of life they want to have in retirement, failure to plan for this eventuality will however lead to unpleasant consequences.
The relevance of the meeting became obvious when persons presumed to be retiring sooner showed they really don’t understand basic retirement procedures.

Culled from Thisday

Tuesday, 19 July 2016

Drop in Rates Swells Pension Burdens in U.S.-Vipal Monga

Companies struggle to close funding gap, avoid big rise in payments to government insurer

The U.K’s surprise vote to leave the European Union took a bite out of corporate pension plans in the U.S., as investors fled stocks for the safety of bonds last month, pushing interest rates lower.
Under accounting rules, the declining rates triggered an increase in pension obligations for companies with defined-benefit plans, which offer retirees a set payout.
Now, those companies are pursuing a variety of tactics as they struggle to close the resulting gap in pension funding and to avoid steep increases in premium payments to the nation’s pension insurer.
The combined pension deficit for S&P 1500 companies ballooned to $568 billion at the end of June, a $164 billion increase from the end of 2015, according to Mercer, a benefits consulting firm.
And companies could have large holes to plug by the end of year, when they typically complete their funding calculations.
“It’s brutal,” said Alan Glickstein, senior retirement consultant at Willis Towers Watson.
But the market’s turmoil could help fatten the coffers of the U.S. Pension Benefit Guaranty Corp., which backstops the private-sector pensions that cover about 40 million Americans.
The federal agency collects a fixed fee for each person enrolled in private-sector pension plans and a separate fee, or variable premium, for every dollar that pension plans are in deficit.
So, there could be a fee windfall heading its way in coming months and years as pension deficits balloon.

Those fees were already on the rise. Congress passed increases in the Bipartisan Budget Act of 2015, mandating a 25% increase in the fixed fee between 2016 and 2019 for plans sponsored by single employers. Variable rates will rise roughly 37% over that period.
Last year, the agency received some $4.1 billion in premium revenue from those plans, up 8.5% from 2014, reflecting prior premium increases.
Many consultants and plan managers say the PBGC’s premium revenue, all of which comes out of corporate pockets, will jump again this year.
As they scramble to close their pension funding gaps, some companies are exploiting low interest rates to borrow cheaply in bond markets.
Others could step up plans to transfer pensions off their books entirely by paying insurance companies to take over those obligations, said Caitlin Long, a pension expert.
Newspaper publisher McClatchy Co. said in February it would contribute $47 million of real-estate assets to its pension plan to boost funding and reduce fees.
In February, General Motors Co. sold $2 billion of bonds, and pumped the money into its pension plan. One investment banker at a major bank said he expects similar deals to come to market as the year progresses.
Chemical maker Chemtura Corp. shifted part of its pension plan to an insurer earlier this year, citing rising PBGC fees as a reason.
Pittsburgh-based specialty-material manufacturer Allegheny Technologies Inc. is considering doing the same with some of its pension, said Patrick DeCourcy, the chief financial officer, in an earnings call in April.
The potential pension deal would “help to lower the burden of significantly escalating premium charges from the PBGC,” said Mr. DeCourcy, according to a transcript of the call.
Such deals are expensive, however, and take a lot of time to put together, said Ms. Long.
In the interim, many companies could simply tap bond markets for a loan.
Not only are interest rates low, but interest payments on bonds are tax deductible, and companies don’t have to pay additional fees to the PBGC. “I would think this is an environment that companies would find compelling,” one banker said.
But companies are continuing to offload their pension burdens. Paint manufacturer PPG Corp. decided to transfer some of its pension plan to Massachusetts Mutual Life Insurance and Metropolitan Life Insurance Co. partly to avoid the rise in PBGC premiums, according to finance chief Frank Sklarsky.
Congress approved an increase in PBGC fees as part of an accounting maneuver that allowed it to fund the 2015 federal budget. Any fees that go to the PBGC count as revenue for the federal government, helping to offset total spending.
One PBGC official said the agency would rather see companies fully fund their pensions than pay big fees.
“We prefer if people fund up their plans,” the official said. “It’s in the participants’ interests for the plans to be fully funded.”

Culled from wallstreet

Friday, 15 July 2016

3 People You Should Never Take Financial Advice From-Sheiresa Ngo

If you find yourself in a financial bind, you may be anxious to seek advice for how to manage your money. However, it’s important to be careful about where you get your advice. Don’t let desperation lead you down the wrong path. Bad advice could cause you to make a financial decision that will put you in a worse situation. Here are three people you should never take financial advice from.

1. Your broke friends

Broke | Source: iStock

Your friends may mean well, but if they never seem to have money, do you really want to take advice from them? Your best bet is to get advice from a financial professional. Steer clear of taking advice from anyone who is in worse financial shape than you are. The only lessons you should take away from them are what not to do with your money.
William S. Matthews, author of Everything I Needed to Know About Money I Learned from My Broke A$$ Friends, said learning from other people’s money mistakes can help you stay on course with your finances. “After countless discussions with friends, I was amazed and saddened by the money decisions many were making. The majority were living paycheck-to-paycheck,” Matthews told The Cheat Sheet. “Money management is about choice — choosing how to spend and save your money. Often, people’s material needs meet or exceed their income. Don’t shackle yourself with golden handcuffs (a luxury car, designer labels, and enormous debt).”

2. Financial “experts” without any type of financial certification

Businessman | Source: iStock

Some people claiming to be financial experts have good advice. However, you should be leery of taking advice from anyone who is not certified or who hasn’t had any formal training in the area they are advising you in. Books and seminars are not enough when it comes to giving solid money advice. For example, if you’re looking for advice when it comes to developing a comprehensive financial plan, you’ll want to start by seeking the services of a certified financial planner.

The Certified Financial Planner Board of Standards has an online directory of certified planners. And if you’re in need of credit advice and help with debt management, a certified credit counselor can help steer you in the right direction. Check out the National Foundation for Credit Counseling website for more information on how to find a counselor.

3. Financial professionals with a bad reputation

Man with money |Source: iStock

While certification is important, it’s also wise to make sure whomever you hire is in good standing. Barbara A. Friedberg, a former investment portfolio manager, said it’s important not to be blinded by fancy titles. “Don’t be swayed by pedigree. The advisor garners total trust because of their impressive educational background. There are unscrupulous advisors with degrees from prestigious universities. There may also be scammers in your church, alumni organization, or neighborhood group,” Friedberg told Investopedia.
Do your research beforehand. For example, if you plan to hire a broker, you can check for more information on FINRA’s BrokerCheck website. This site will tell you if a broker or brokerage firm is registered, what type of information was given to regulators, the broker’s experience, and what the broker is qualified to do.

Culled from wallstreet

Thursday, 14 July 2016

FG stops remittance of workers’ pension deductions- Nike Popoola

The Federal Government has not been remitting the pension contributions of most of its workers into their Retirement Savings Accounts under the Contributory Pension Scheme since October last year.

This revelation was contained in the 2016 annual report of the Pension Fund Operators Association of Nigeria, which was obtained exclusively by our correspondent on Wednesday.

PenOp stated in the report, “Compliance with regard to remittances of pension contributions from the public sector at both the federal and state levels have lagged notably. While remittances from the Federal Government through the National Pension Commission were last received for September 2015, some states have outstanding remittances dating back over two years.”

The association, however, said private sector remittances had been more consistent though impacted by the current adverse economic environment in the country.

Most of the federal workers affected are direct employees of ministries, who are not under the parastals but are being paid by PenCom with the funds released from the Central Bank of Nigeria.

It was also gathered that the Federal Government had also failed to increase its contribution into the RSAs of workers in the parastals by crediting their accounts with 15 per cent of their total monthly emolument two years after the Pension Reform Act, 2014 increased the contribution to 18 per cent (10 per cent for employers and eight per cent for the workers instead of the 7.5 per cent that each was contributing before 2014).

The implication of the non-remittance of the pension contributions to the workers’ RSAs is that upon retirement, most of the workers will be unable to process their pensions until all arrears are paid together with their accrued rights under the Defined Benefits Scheme.

However, the Pension Fund Administrators may agree to pay the retirees if their unpaid arrears are negligible by then.

Amidst the dire economic challenges in the country, PenOp said the aggregate pension assets under the CPS grew by 15 per cent from N4.61tn as of the end of December 2014 to N5.3tn in 2015.

The association said the call to invest a greater portion of the pension funds in infrastructure required clear, calm, incisive and strategic thinking to achieve any notable success.

“With N5.3tn grown over an 11-year period, careless deployment could wipe these gains out in an instant,” PenOp said.

If looked at as a constituent part of national economic strategy, PenOp said the focus would switch to how it could support the industry to grow beyond N20tn.

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Wednesday, 13 July 2016

How your brain gets in the way of making smart money decisions-Lisa Scherzer

When it comes to money, everyone makes bad decisions. And it’s not because contributing to a 401(k) requires a PhD in physics. It’s often because our brains are hard-wired to prioritize short-term gains over long-term benefits.

“Traditional economic theory suggests that investors are rational decision-makers, carefully weighing all available information to make choices that result in the best possible outcome,” a Legg Mason report on behavioral finance explains.

Years of behavioral economic research have shown how untrue that is. Here are a few ways your brain trips you up and tips to help you avoid falling into these cognitive traps.

We procrastinate.

One of the most significant psychological factors impeding people from achieving their savings and retirement goals is inertia. There are various ways inertia — sometimes called the status quo bias — manifests itself. It can be as simple as keeping the same cable plan that costs $120 a month even though a competitor cable provider has a similar plan for $100.

Saving in a 401(k) plan is another big one: Studies have found that despite being given the opportunity to enroll in a 401(k), with an employer match, employees tend to be passive. Procrastination sets in; it’s much easier to just imagine doing the right thing in the future. Many more employees say they plan to take action and enroll than actually do.

That’s why more companies have found success with automatic enrollment: In one company that adopted automatic enrollment (when employees first become eligible for the savings plan, they’re automatically enrolled unless they opt out), 401(k) participation rates for new workers increased from 49% to 86%. (But be aware there’s also a downside to automatic enrollment. A 2013 report from the Center for Retirement Research at Boston College showed that if you start workers at a low default contribution, they rarely take action to increase their rates over time and may still come up short as they near retirement.)

So how can you overcome your tendency to do nothing? Automate as many aspects of your finances as you can. Set up automatic bill pay for recurring bills. Save in a 401(k) plan if you have one and see if your plan offers an auto-increase feature. Another way to get motivated is to imagine life 20 or 30 years from now. A study by two researchers found that people shown vivid images of their older selves — where they looked 68 or 70 — were more likely to make decisions that favored long-term rewards.

We hate losing.

Loss aversion is the tendency to avoid accepting the reality of losing money. Put simply, you just can’t bear to admit you made a mistake – and it’s something that should be familiar to investors who find themselves holding onto a loser stock.

“Psychologically speaking, the pain of losing $100 is approximately twice as great as the pleasure of winning the same amount,” Shlomo Benartzi, a behavioral economist at UCLA Anderson School of Management, wrote in a report for Allianz Global Investors (Benartzi is also chief behavioral economist at Allianz). We’ll spare you the evolutionary reasons for humans’ tendency for loss aversion, but suffice it to say it’s an expensive trait.

Selling a losing stock is painful, so many investors just avoid a short-term loss, often at the expense of longer-term goals. it. And at the same time people often sell winning stocks too soon because it realizes a gain — and who doesn’t like that? The mistake here is looking at your investments in separate pieces rather than as a whole.

Is it possible to get over this bias? Richard Thaler, behavioral economist at the University of Chicago Booth School of Business and author of the book “Nudge,” has suggested that retirement savers — especially those who have a long time horizon — should invest in a globally diversified portfolio of stocks, “and then scrupulously avoid reading financial news articles or, even worse, watching financial news networks. Paying attention day-to-day is damaging to one’s financial and emotional well-being.”

We can’t walk away.

It’s happened to all of us: You spend money on something and for some reason you don’t end up using it. But you don’t want to give up on it because you’ve invested all that money. It could be sitting through a movie you hate or continuing to make payments on a car you can no longer afford. It even could be driving 20 miles out of your way to a store to look for a particular pair of jeans and buying something anyway even though the jeans aren’t there —

because you invested time and gas money to get to that particular store.

Culled from yahoo finance

Monday, 4 July 2016

World Biggest Pension Fund Seen Losing $43 Billion Last Quarter- Anna Kitanaka Shigeki Nozawa

Losses for the world’s biggest pension fund likely deepened in the quarter just ended, extending what may be its worst annual loss since the global financial crisis, brokerage estimates showed.

Japan’s Government Pension Investment Fund will probably post a 4.4 trillion yen ($43 billion) loss in the April-June quarter, according to calculations by Yohei Iwao, executive director of the institutional equities division at Morgan Stanley MUFG Securities Co. That follows what he estimates was a 5 trillion yen decline in the fiscal year ended March 31, which would amount to the worst performance since fiscal 2009 when the fund lost 9.7 trillion yen.The calculations come amid criticism the government has put the public’s pension money at risk after the fund known as the whale for the size of its assets increased its equity allocations in 2014. That’s prompted the main opposition party to pledge GPIF will move investments back into safer ones in its manifesto ahead of elections this month.
“Looks like the scrutiny on GPIF will continue,” Morgan Stanley MUFG’s Iwao said.

Stock Routs

GPIF has been hurt after global stock routs in mid-2015 and early this year helped wipe about $7.4 trillion off world equities in the past 12 months. Japan’s Topix index has tumbled 19 percent in 2016 to be the second-worst performing developed stock market as the yen strengthened, reducing returns from overseas holdings.
The fund’s assets under management probably fell to 133 trillion yen, Iwao estimates, from about 140 trillion yen at the end of December when it last reported results.
GPIF likely held about 43 percent of its portfolio in domestic bonds at the end of June, higher than its target of 35 percent for the asset, he said. Japanese stocks probably accounted for 22 percent, while international equities made up 22 percent, Iwao said. He estimates foreign debt stood at 14 percent. GPIF’s target for equities is 25 percent each, and 15 percent for international bonds.

Post-Election Announcement

The pension fund is due to report results on July 29, about three weeks later than usual and after the upper house elections on July 10. Morgan Stanley’s calculations are based on the assumption that GPIF hasn’t rebalanced its portfolio, Iwao said.
Iwao’s estimates for the quarter are largely in line with calculations from SMBC Nikko Securities Inc. Hidenori Suezawa, a monetary and fiscal analyst at SMBC Nikko, forecasts a loss of 3.5 trillion yen to 4 trillion yen for the quarter. The deficit probably came from stocks and foreign debt holdings, while valuations for domestic bond holdings rose, he said.
“They can’t start buying domestic bonds, so there’s no turning back” said Suezawa. “They should keep buying risk assets when they fall, with a long-term view to gradually increase their assets again.”

Culled from Bloomberg