Saturday, January 15, 2011

As banks start paying dividends again, pension funds could get a bit healthier

Pension funds, including those of public employees, and the portfolios of some better-off retirees may improve considerably as banks start paying dividends again, according to a New York Times story Jan. 14 by Nelson D. Schwartz and Eric Dash, “Banks are poised to pay dividends after 3-year gap; Billions for pensions; Milestone after bailout, but concerns about public reaction”. The link for the story is here

Many pension funds had depended on bank stock dividends for income, and in the past financial planners had often recommended bank stocks to older customers.  So some retirees may have taken particularly bad hits in 2008.

The ability of banks to pay dividends certainly depends on performance, which could be affected by new rules to protect smaller consumers, since banks (link airlines) came to depend so much on the fees.  They would also depend on the stress tests.

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