Abe reforms take aim at Japan’s $1 trillion pension fund – Pension scam?

…Sir Martin’s maximum annual bonus opportunity was 435% of his base salary in 2012, with 50% of the award deferred for two years and subject to clawback provisions. The proposed new long-term incentive plan provides for long-term awards of up to 9.74 times salary in the case of the CEO….

There is no receptionist at the dimly lit, 40-year-old Tokyo building where the headquarters of the Government Pension Investment Fund, the world’s largest pension, occupies the second floor.

The waiting area consists of two mismatched couches. Behind a single closed door, over $1 trillion – equivalent to the annual economic output of South Korea – is run almost on autopilot and invested largely in government bonds issued across the street by Japan’s Finance Ministry.

Equally worrying for critics, including members of Japan’s ruling Liberal Democratic Party, the fund has no independent board for oversight, no ability to hire in-house fund managers and no record of success during a period of economic growth of the kind Abe has pledged to deliver to voters and markets.

Officials led by chairman Takahiro Mitani say the fund, known as GPIF and which employs less than 80 people, has performed according to the mandate set by its supervisor, the Ministry of Health and Welfare: keep costs down and risks in check.

What happens next, they say, will depend on the reforms the Abe administration enacts in the coming months as it looks to mobilise public savings to help drive Japan out of two decades of deflation and sluggish growth.

http://newsonjapan.com/html/newsdesk/article/103423.php

Retirement Heist: How Firms Plunder Workers’ Nest Eggs

Ellen Schultz breaks down the scam nicely from 5.00 mins

10/19/2011

Why was GE closing its fully funded pension plan, while continuing its financially burdensome executive plan? This is the question to which Ellen Schultz’s incisive new book, Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers (Portfolio, 2011) offers a powerful answer.

[…]

A carefully planned heist

She explains that the current retirement crisis is “not a demographic accident. It was manufactured by an alliance of two groups: top executives and their facilitators in the retirement industry—benefits consultants, insurance companies and banks.”

Executives are viewed “as beleaguered captains valiantly trying to keep their overloaded ships from being sunk in a perfect storm. In reality, they’re the silent pirates who looted the ships and left them to sink, along with the retirees, as they sailed away safely in their lifeboats.”

In 2000, most pensions were fully funded

Two decades ago, pensions were well funded, due to laws and regulations passed in the 1970s and 1980s. By 2000, pension plans at many large companies had large surpluses that would have covered all current and future retirees’ pensions without them having to contribute anything.

Yet US firms found ways to siphon off billions of dollars in assets from the pension plans. Verizon used assets to finance downsizings. GE sold pension surpluses in restructuring deals, indirectly converting pension assets into cash. Many firms clandestinely cut benefits, using “actuarial sleight of hand to disguise the cuts.”

Cutting benefits boosted earnings

Cutting benefits boosted earnings. New accounting rules “turned retiree benefits plans into cookie jars of potential earnings enhancements and provided employers with the means to convert the trillion dollars in pensions and retiree benefits into immediate dollar-for-dollar benefit for the company.”

Since accounting rules rewarded employers for cutting benefits, retiree benefits plans soon morphed into profit centers. Retiree plans became handy earnings-management centers at the expense of the retirees. Yet as workers’ retirement benefits were cut, “supplemental executive pensions”  ballooned along with escalating deferred compensation. “Today,” reports Schultz, “it’s common for a large company to owe its executives several billion dollars in pensions and deferred compensation.”

It’s these growing “executive legacy liabilities” that account for much of the “growing pension costs”.  Executive liabilities are often large, growing, underfunded or unfunded, and hidden, buried within the figures for regular pensions.

“With no punitive damages under pension law, employers face little risk when they unilaterally slash benefits, even when promised in writing, since they can pay their lawyers with pension assets and drag out the cases until the retirees give up or die.”

Today, Schultz reports, “pension plans are collectively underfunded, hundreds are frozen, and retiree health benefits are an endangered species. And as executive pay and executive pensions spiral, these executive liabilities are slowly replacing pension obligations on many corporate balance sheets.”

More here;

http://www.forbes.com/sites/stevedenning/2011/10/19/retirement-heist-how-firms-plunder-workers-nest-eggs/

And Abe`s favourite PR company

LAPFF recommends members to oppose WPP pay

The Local Authority Pension Fund Forum (LAPFF) is advising its members to oppose WPP’s remuneration report and long-term incentive plan because of concerns about the scale of executive reward.

In a statement, the forum welcomes WPP’s efforts to improve its pay practices, however it said that the “quantum of payments made to executives, and potentially payable in future, is considered excessive”.

Forum chairman counsellor Kieran Quinn said: “We recognise that WPP has sought to change its remuneration policy, following a shareholder rejection of the policy in 2012. However the scale of reward available, and paid in the past year, remains very substantial.”

The LAPFF noted that according to WPP’s accounts, the total pay has declined by 34% over 2011 and Sir Martin Sorrell’s total remuneration in 2012 was £17.6m, including an annual salary of £1.3m, £11m from a five-year incentive plan, benefits dividends worth £1.3m and pension contribution of £586,000.

Sir Martin’s maximum annual bonus opportunity was 435% of his base salary in 2012, with 50% of the award deferred for two years and subject to clawback provisions. The proposed new long-term incentive plan provides for long-term awards of up to 9.74 times salary in the case of the CEO.

“This is considered exceptionally high for the UK market place,” said the LAPFF in a statement.

In the organisation’s ‘Expectations for Executive Pay‘ document, the LAPFF states that it expects that companies should assess the quantum total awards of pay packages in determining what would be considered ‘reasonable’ by shareholders and other stakeholders.

It said that all elements of remuneration should be taken into account so that the actual amount granted is considered as a whole.

First published 07.06.2013

monique_simpson@wilmington.co.uk

http://www.pensionfundsonline.co.uk/pension-funds-insider/governance/lapff-recommends-members-to-oppose-wpp-pay/1010/

July 2, 2013 - Posted by arclight2011part2 | Uncategorized