$4 Trillion Lost Worldwide by Pension Funds in 2008

The recent financial crisis drained retirement funds worldwide by $4 trillion, according to an estimate from the Organization for Economic Cooperation and Development.

The estimate was released Wednesday, November 12, at an OECD seminar in Paris in a presentation by Pablo Antolin, principal economist at the organization’s financial affairs division.

“The main message is that losses are substantial and dependent on the asset allocation of pension funds in a specific country,” Antolin said.

The estimate—that defined-benefit and defined-contribution plans lost the money from January 1 to early November—was calculated by using the OECD’s own asset allocation data by country as of December 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 percent or more of assets on average, according to the OECD’s Web site. Pension funds in South Korea and Luxembourg, where equity exposures are very low, have experienced minor losses.

Funding levels have declined 5 to 15 percentage points on average, depending on the discount rate used, and the OECD expects that when year-end data are reported, the figures will be worse.

Filed by Drew Carter of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.