The pleasant and well-financed retirement enjoyed by many people in the past may soon become a distant dream.

Workers around the world are waking up to the fact that it is becoming harder to obtain a comfortable retirement.

The culprit in all cases is the same the deficits bedeviling many private sector and public sector pension funds.

Gone are the days when getting a job with the government or a multinational corporation (MNC) guaranteed a worker a comfortable salary for his whole working life, and a handsome pension after retirement.

These benefits were possible in the days when pension funds were flush with cash.

Today, however, thanks to falling stock markets and to revolutionary increases in life expectancy, actuarial estimates for these funds are going awry, leading to widening gaps in their asset-to-liability balances.

Individuals today will have to shoulder much more responsibility for their retirement, as more and more employers, including blue-chip MNCs are no longer prepared to bear all the risks of providing pension benefits to retirees.

Even governments, with all the financial instruments that they hold, are finding it tough to handle the deficits in their pension funds.

Urgent reforms

A 2003 World Bank study said the pension deficit problem is so great, pension entitlements in the United States and in Europe may have to be cut in half.

Piia-Noora Kauppi, a Finnish member of the European parliament, recently quoted a study on pensions in her native country saying "pensions in Europe will have to be reduced in the future, or more of our GDP [gross domestic product] will have to be spent providing pensions".

Only 25 per cent of people in Europe are covered by supplementary occupational and personal pension schemes, she said, underlining the urgent need to develop pan-European pension funds.

The situation in the United States, with the dollar continuing its fall against the euro and yen, is still worse when it comes to maintaining pension fund solvency.

More than half the 32,000 traditional pension plans offered by private employers are under-funded, exceeding a record $300 billion (Dh1.1 trillion), if we can believe a report filed with the US Congress.

US in deficit

According to a November 15 press release from the US Pension Benefit Guaranty Corp (PBGC), its insurance programme for pension plans sponsored by a single employer incurred a net loss of $12.1 billion (Dh44.4 billion) in 2004.

The programme's fiscal year-end deficit increased to $23.3 billion (Dh85.5 billion) from $11.2 billion (Dh41.1 billion) a year earlier.

The PBGC's single-employer programme insures the pensions of 34.6 million Americans in 29,600 plans.

Two of the biggest factors contributing to the $12.1 billion (Dh44.4 billion) net loss for 2004 were a $14.7 billion (Dh53.9 billion) loss from completed and probable pension plan terminations, and a $1.5 billion (Dh5.5 billion) charge for actuarial adjustments due to a change in mortality assumptions.

Partially offsetting the single-employer program-me's losses were premium income of $1.5 billion and investment income of $3.2 billion (Dh12.1 billion).

Overall, including the assets of terminated plans for which PBGC became trustee during the year, the single-employer programme had $39 billion (Dh143 billion) in assets to cover $62.3 billion (Dh227 billion) in liabilities as of Sep-tember 30.

Closer to home, the General Authority for Pensions and Social Security of the UAE came under fire at the Federal National Council (FNC) during a debate on its performance last week.

Many analysts worry about the increasing deficit in its pension funds. According to one of the FNC members quoted by the media, "the authority is going through a dangerous financial crisis due to huge deficits".

There are a number of insurance companies, some of whom are not even registered with the local authorities, offering "excellent retirement plans" enticing the residents of the region.

Investors in these plans should be extremely careful and weigh their decisions based on accurate information before parting with their money.

It is always better to consult a professional financial consultant before joining any private insurance plan.

V.A. Tommy is an executive manager for business development at Oman Insurance Co in Dubai. The views expressed here are his own and not necessarily subscribed to by his employers.