The Great Pension Ponzi

[An Oasis]

….By 2016, Mr Johnson added, the taxpayer is likely to be contributing an even larger portion as the state makes up a projected £10.3bn shortfall between total contributions and total payments. "It is a system that is out of control," he said. The total unfunded UK public-sector pension liability is estimated to be up to £1.18 trillion – 80pc of GDP or £47,000 per household….

Steve Gibson mentioned this (about 18 months ago?) but so little has been written and the giant pension funds bods are keeping very tight lipped, they know this is a huge financial time bomb and when it explodes will cause terrible hardship for all those affected.


So a very good article @ http://theautomaticearth.blogspot.com/2011/02/february-12-2011-pensions-treasuries.html

A long article but well worth reading. Mainly focused on the USA but with relevant UK bits.

….Britain's civil servants must be weaned off their gold-plated final salary pensions to avert a "fiscal calamity", a new report into the looming pension crisis has warned. Public-sector retirement promises have become a "Madoff-style pyramid, now collapsing under the weight of insufficient contributions, rising longevity and an ageing workforce", Michael Johnson said in his report for the Centre for Policy Studies, "Self-sufficiency is the key".

Unless the problem is addressed, Britain faces a "societal division" caused by the gulf between private and public-sector pension provisions, and the "disproportionately high pensions paid to high earners" in the Civil Service. Without reform, the divisions will be entrenched between the generations, he added, warning of "looming generational inequality [that] manifests itself as a rising tax burden on today's workers, who then save less for their own retirement".

More than three-quarters of civil servants are in a final salary scheme, compared with less than a fifth of private-sector employees, with the taxpayer providing almost 80pc of all public-sector final salary contributions. In 2009, the state paid £14.9bn towards the £19.3bn cost of the UK's four largest civil service schemes, while staff provided £4.4bn….

Probably like many on this forum, my pension scheme is based on my businesses, which I hope to be able to sell off and possibly act as a non-exec director but that’s my gamble.

What’s yours?

 

[Dawg]

But what do you do? The state has a legally enforceable contract with it's employees to provide the pensions as agreed.
Do you enact new laws with retrospective effect? This negates the force of law and certainty: any bargain you make will be able to be changed in the future by politicians. You want that? Not being able to negoitiate with any degree of certainty, like a third world kleptocracy?
So,what do you do?

 

But what do you do? The state has a legally enforceable contract with it's employees to provide the pensions as agreed.
Do you enact new laws with retrospective effect? This negates the force of law and certainty: any bargain you make will be able to be changed in the future by politicians. ?

You mean like what they is doing now.?:|

Earl

 

[Dawg]

You mean like what they is doing now.?:|

Earl

They might be, and I may have missed it. Do you have examples of retroactive legislation passed by this, (or the last), government?

 

[Esk247]

I can only speak for my generation (those in their 20s).



we're ******




chin up

 

[deniser]

I lost all of my pension pot to the Equitable Life fiasco. I now have property income and cash and that's what I will rely on in my old age. There is no way I will ever subscribe to another pension scheme.

They are just giant pyramid schemes designed to make bankers rich and everyone else poor. All these pension funds could have made more money in the last 20 years by putting the money into a savings account.

 

[directmarketingadvice]

But what do you do? The state has a legally enforceable contract with it's employees to provide the pensions as agreed.

Wasn't the increase of the retirement age a case of one party unilaterally changing that contract to the detriment of the other party?

There have been some interesting articles from the USA about their situation. Including this one from the NYT last month that said:

“policy makers are working behind the scenes to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.”

If the money's not there, the money's not there.

It's not like this is a big surprise. I'm in my early 40s and I can remember having conversations back in the mid-80s with friends where we'd talk about how, by the time we hit our 60s, there'd be no state pension for us.

Steve

 

[Dawg]

The age change was certainly a retrospective change, and as you say: if the money is not there the money is not there.

Just pointing out some of the ramifications of drawing back the pension schemes over and beyond severely pissing off public sector workers.

But pensions, public and private, remain the 600lb gorilla in the room. The state can't afford the public ones, the return on private ones is crap and costs are high, and the favourite alternative until now, relying on your own domestic property is unlikely to suffice as the population demographic ages.

Which brings us back to being Mottramed, (section 3, para 5)

 

[Tom McClelland]

Problem is, that the state OAP and the incredibly generous schemes for public employees were always Ponzi schemes in the truest sense. Nothing from people's contributions was ever being saved towards future payments to those people. Instead it was all going to fund the retirements of existing retirees. Like Steve, I've been involved in conversations with people since the '80s where we could see that this wasn't going to be sustainable as people live for pensions that are longer and longer.

isn't it marvellous, how easy it was for the state to be generous not with taxpayers money, but with the future payments of the taxpayers children, in the promises that they made.

In the late 1940s, men lived on average for about 3 years after retirement. Now many people retire looking forward hopefully to a pleasant 15-20 year holiday, if only someone will pay for it. Many of them thought that they were saving up for their retirement with their NI contributions ("National Insurance" is such a dishonest name for that tax, you aren't insuring anything), but in reality they were paying for their parent's pensions.

 

[Philip Hoyle]

I've been saying for years that those reaching retirement in the late 90s and early 00s were the lucky generation that wouldn't be seen again. We're now in a downward spiral - those retiring in the next decade will be comfortable, but those in decades later will be worse, and so on. Just like those retiring in the 90s were better off than those in the 80s and 70s. We've peaked and are now over the hill and on a downward path.

In the 80s and 90s people were getting huge windfalls from endowments, privatisations, demutualisations and wholly unsustainable pension annuities. It was all a ponzi scheme, financed by "hopes" of future growth rather than reality. Good for those who benefitted, but pants for everyone else!

I forecast a succession of financial catastrophies - we've only just begun and there's a lot more to fall out of the woodwork.