Coronavirus, the stock market and your pension: Frequently asked questions
Here at PSPRS, we are working day and night to monitor the extreme fluctuations in the world’s financial markets. We have a team of committed investment experts focused on how best to react to these changes and, whenever possible, how best to capitalize on potential opportunities that might benefit the system.
At the same time, we continue to have a strong commitment to keeping you informed about the status of the markets, the financial health of PSPRS, and the steps we are taking to protect our members, employers and Arizona’s taxpayers.
Q: Is my pension safe?
A: Yes, retiree and survivor pensions of members of PSPRS-managed plans are determined by the number of years of credited service completed during a member’s career and the member’s average salary. Pensions are not based on the annual performance of the stock market.
Q: Does the turbulent stock market threaten the entire pension system?
Q: What is PSPRS doing to protect the trust that provides retiree and survivor pensions?
A: PSPRS, like most pensions, takes a long-term approach to investing. Over time, PSPRS has targeted an annualized return of 7.3 percent. This long-term forecasting takes into account that investment returns in a given year will either exceed or fall below the long-term assumed earnings rate. As of the last fiscal year ending June 31, 2019, PSPRS exceeded its assumed earnings rate over both 7-year and 10-year time frames.
While PSPRS hopes for economic stability, its investment team is on the lookout right now for opportunities to generate investment returns for the years and even decades to come. These opportunities may include buying publicly traded stocks at low prices or buying privately held assets at below market value from owners who may want or have to sell due to current economic conditions or other factors. Likewise, PSPRS may look to sell its interests in certain investments to pursue other opportunities and reduce risk to the trust.
Q: Is PSPRS better prepared to handle market fluctuations and/or a possible recession than it was during the housing market collapse in 2008?
The pension benefit reforms passed through Propositions 124 and 125 in 2016 and 2018, respectively, will also help PSPRS manage through volatile markets with or without a recession. These reforms created a simple cost-of-living-increase for retirees of PSPRS-managed plans in place of an unsustainable pension benefit increase formula that hampered the system’s recovery in the wake of previous downturns.
Q: How can I learn more about PSPRS investments?
A: There are many resources for retirees, members, and the public to learn more about the PSPRS investment strategy, performance and even the men and women who make up our investment team. These include: