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Brookings: The Financial Crisis' Effects on the Alternatives for Public Pensions

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The Financial Crisis’ Effects on the Alternatives for Public Pensions, Pensions, Retirement, Quality-of-Life Issues, by Douglas J. Elliott, Fellow, Economic Studies, Initiative on Business and Public Policy, The Brookings Institution, April 15, 2010.

  • “The recent financial crisis dramatically changed the situation of public pension plans and the alternatives available to them going forward. Most obviously, the funding levels of these plans are considerably worse now than during the bubble. Asset values have declined substantially, even taking account of the sharp rebound in the financial markets since March of 2009. At the same time, reported liabilities have gone up as well, principally as a result of the passage of time bringing the remaining pension payments
    closer to the present day. However, the crisis did not just create a one-time adjustment in values and funding levels. The investment alternatives for plans look different now than they did a few years ago. This is partly because they have changed and partly because we have learned lessons, or sometimes relearned them, about risks and returns from individual asset classes and about overall asset‐liability management. This paper reviews the various changes affecting public pension plans and draws some conclusions for their future.”

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