The news on Monday 23 February that Citigroup may be quasi-nationalised provides evidence, if any were needed, that the global financial crisis still has plenty of rabbits up its sleeve. To relax would be foolhardy. Stay alert or risk being bitten by one of our buck-toothed friends.
But one can't be negative ALL the time or one starts to go a little mad. And so it is that the first attempts are being made to look beyond the crisis to the snowdrops under leafless trees that are the first signs of re-growth.
First up this morning is Watson Wyatt. According to a new research paper from the investment consultancy (entitled DC - reality bites) that employer-sponsored defined contribution (DC) pension schemes will eventually emerge from the current economic crisis in a better shape than they went in.
“The current economic crisis has been a wake-up call for most employer-sponsored DC schemes," says Garry Smith, a senior consultant at Watson Wyatt. "Members of DC schemes glancing over their annual benefits statements this year will be disheartened by the dramatic falls in their fund values. That will do little for employees’ confidence in DC pensions and in pensions generally. But during the coming months, there will be a significant debate around developing stronger and more focused solutions.”
Not wishing to be cynical, this had better be the case or it's curtains for the likes of Watson Wyatt. But to the report.
The crisis has placed DC under the spotlight and exposed it to a degree of stress-testing it has never before endured, according to Watson Wyatt. This, in turn, has drawn attention to the issues, dangers, risks and opportunities presented by DC for employers, employees and providers.
As a result, there will be greater engagement by pension scheme members in the future and the quality of DC schemes will increase. The research paper also suggests that "the recent decline in popularity and trust in company provision may well slow down as it becomes clear that the popular alternatives, like property, are not actually a one-way bet”.
This is where Watson Wyatt's native optimism really comes into play.
“During the coming months, there will be significant debate around developing stronger and more focused investment solutions," says Gary Smith. “Traditional approaches have been tested and, in some cases, found wanting. The market will learn and move."
So let it be written etc.
Fiona Rintoul, Editorial Director
©2009 Funds Europe