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The Illusion Of Pension Savings - U. S.

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http://www.nytimes.com/2010/09/18/business/18pension.html?_r=1&ref=business

Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget.

Actuaries, including some who serve on the profession’s governing boards, got wind of what Illinois was doing and began to look more closely. Many thought Illinois was using an unorthodox maneuver to starve its pension fund of billions of dollars, while papering over a widening gap between what it owed and how much it had. Alarmed, they began looking for a way to discourage Illinois’s method before other states could adopt it.

They are too late. The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.

Texas saved millions of dollars this year after raising its retirement age for future hires and barring them from counting unused sick leave in their pensions. More savings will appear in coming years. Rhode Island also raised its retirement age for future retirees last year, after being told it could save $90 million in the first year alone.

Actuaries have been using the method for years, it turns out, but nobody noticed, in part because official documents usually describe it in language few can understand.

The technique is fairly innocuous in normal times, allowing governments to smooth out their labor costs over many years. But it becomes much riskier when pension funds have big shortfalls, when they need several decades to pay down their losses and when they are cutting benefits for future workers — precisely the conditions that exist today.

“In a plan that is not well funded, I wouldn’t recommend it,” said Norm Jones, chief actuary for Gabriel Roeder Smith & Company, an actuarial firm that helps Illinois and a number of other states that have adopted the method. He said the firm’s actuaries informed officials of the risks and it was the officials’ decision to use the technique.

Struggling states and cities need to save money, but they run into legal problems if they tamper with the pensions their current workers are building up year by year. So most places have opted to let current workers and retirees go unscathed. Colorado, Minnesota and South Dakota are the exceptions, dialing back cost-of-living increases for people who have already retired. All three states have reaped meaningful savings right away, and all three are being sued.

Excellent.

So if we pretend we are going to hire new workers we can start saving now on the pension contributions we aren't yet making!!!

America clearly is one massive ponzi scam, watched Michael Moore's film last night clearly he had an angle but when you read things like this it would appear that he might be closer to the truth.

During the boom all sorts of frauds can be covered up, when the inevitable bust comes everything gets revealed.

Is this sort of thing allowed in the UK?

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One factor is as all these funds were buying assets it naturally drove the price of those assets up. They could of all been buying baseball cards, and they would have gradually been increasing in price just the same.

As the mass of boomers retires, all these funds will turn to being net sellers of assets. How much is a stock really worth paying a dividend of less than 1% in a highly competitive industry.

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One factor is as all these funds were buying assets it naturally drove the price of those assets up. They could of all been buying baseball cards, and they would have gradually been increasing in price just the same.

As the mass of boomers retires, all these funds will turn to being net sellers of assets. How much is a stock really worth paying a dividend of less than 1% in a highly competitive industry.

I'd guess that Churchill's quip about democracy is appropriate here.

What I mean is, as long as we have significant production surpluses, they will chase any investment opportunity - after all, they've got to be invested somewhere.

So stocks with a 1% return might still be popular... if the alternative is stocks returning 0.01%.

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I'd guess that Churchill's quip about democracy is appropriate here.

What I mean is, as long as we have significant production surpluses, they will chase any investment opportunity - after all, they've got to be invested somewhere.

So stocks with a 1% return might still be popular... if the alternative is stocks returning 0.01%.

Wouldn't that depend on inflation?

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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