Pension funds tracked by the OECD recovered somewhat in the first half of 2009, but assets are still down significantly from 2007, the Organization for Economic Co-operation and Development said Monday.

Pension funds in the OECD area generated investment returns of 3.5% in the first half, but total pension fund assets, as of June 30, were still 14% below their December 2007 levels, the organization said. The OECD data includes all types of plans: occupational and personal, mandatory and voluntary, covering both public and private sector workers).

For the OECD as a whole, in the first half of 2009 funded pension arrangements have recovered US$1.5 trillion of the US$5.4 trillion in market value that they lost in 2008.

“Thanks to the stock market rally in emerging markets, some non-OECD countries have already largely made up their 2008 investment losses. By the middle of the year, Chilean pension funds had largely made up their 2008 losses, while assets of Israeli pension funds were above their December 2007 level,” it said.

Also, the average funding level for OECD defined benefit pension plans went up from a 24% deficit at the end of 2008 to an estimated 18% deficit by June this year. Funding levels improved thanks to both investment gains and higher discount rates, it noted.

“Despite these good news, some of the structural challenges faced by private pension systems are yet to be addressed. In particular, the ongoing shift towards defined contribution arrangements calls for an overhaul of regulatory approaches, with default investment options that deliver risk mitigation as members approach retirement. There is also a need to strengthen disclosure requirements and to implement effective financial education programs,” the OECD said, adding that it is continuing its work in these areas and will be publishing reports and policy recommendations over the course of the next year.

IE