11 – I Am Jumping
Image by Kyle Taylor, Dream It. Do It.
Freedom Park Township, Johannesburg, South Africa
Walter takes a moment to jump with the more than 250 preschool students he works with through his Venture, Freedom Park Youth Class. Inspired by his own childhood struggles to become literate, Walter has brought together hundreds of high-school age mentors to teach English language basics like the alphabet, numbers, shapes and days of the week to preschool-age students using games, music, singing and dancing. He also uses the opportunity to educate the high school mentors on issues like HIV/AIDS prevention and teen pregnancy. In a South African economy that oftentimes posts unemployment rates of up to seventy percent, Walter has worked to fund his position, turning a passion for social change into a fulfilling livelihood.
The global economic downturn has affected pensions all over the world, but up until now Central European pensions seemed to have braved the storm. There is a chance that European governments could use the recession as an excuse to U-turn on urgent pension reforms.
According to data released by the Organisation for Economic Co-operation and Development (OECD), private pension funds lost a staggering twenty-three per cent of their value in 2008. The stock marker collapse has developed into an economic crisis, with pension funds falling from declining and earnings and rising unemployment denting pension contributions. Public pensions are being affected by the rise in unemployment benefits and fiscal stimulus packages putting a strain on the public purse.
The largest of the private pension fund losses was felt in Ireland, where losses of thirty-seven per cent were recorded. The Czech Republic experienced the smallest losses below ten per cent.
Stock markets across the world have plummeted since last year, so the diverse range of private pension fund losses can’t be explained by relative losses in the markets. How these pension funds were invested seems to be the deciding factor. While stock markets in OECD countries fell by around forty-five per cent in 2008, Government bonds tended to rise, with the international index up by over seven per cent in 2008.
The countries whose pension funds invested more in bonds than in stocks like the Czech Republic and Slovakia seemed to have fared better than English-speaking countries where pension funds tended to be invested in equities.
Poland’s private pension funds lost more than other Central European countries because of a law which was supposed to aid the Polish stock market. Open Pension Funds (OPFs) are limited to investing only five per cent of their assets outside Poland. While this had meant the Warsaw Stock Exchange is important to the region, but the over-population of funds in the local market drove the over-valuation of Polish stocks; a bubble which burst when the economic crisis swept through.
While private financial sources make up over forty per cent of retirement incomes in Australia, Canada, the UK and US, they only make up five per cent of incomes in Austria, the Czech Republic, Slovakia, Hungary and Poland.
For younger workers in these areas though, pensions are expected to provide a significant chunk of retirement incomes. Pension funds being resilient to turbulent economic conditions is of paramount importance for this new breed of worker, as they save for retirement.