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Looting The Pension Funds

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http://www.rollingstone.com/politics/news/looting-the-pension-funds-20130926

In the final months of 2011, almost two years before the city of Detroit would shock America by declaring bankruptcy in the face of what it claimed were insurmountable pension costs, the state of Rhode Island took bold action to avert what it called its own looming pension crisis. Led by its newly elected treasurer, Gina Raimondo – an ostentatiously ambitious 42-year-old Rhodes scholar and former venture capitalist – the state declared war on public pensions, ramming through an ingenious new law slashing benefits of state employees with a speed and ferocity seldom before seen by any local government.

Detroit's Debt Crisis: Everything Must Go

Called the Rhode Island Retirement Security Act of 2011, her plan would later be hailed as the most comprehensive pension reform ever implemented. The rap was so convincing at first that the overwhelmed local burghers of her little petri-dish state didn't even know how to react. "She's Yale, Harvard, Oxford – she worked on Wall Street," says Paul Doughty, the current president of the Providence firefighters union. "Nobody wanted to be the first to raise his hand and admit he didn't know what the ****** she was talking about."

Another piece from Matt.

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Foxx news among others has really been hammering on about public-sector pensions, as if all of the USA's financial problems are caused by them. No mention at all of the banking system.

I don't see how Detroit can avoid bankruptcy. At least it will remain as a monument to show us all how government bailouts benefit shareholders and not employees.

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Can I just say, I want to nip this little f*&ker in the bud. The size of the financial crisis next to the size of the public debt for pensions is incomparable. One look at the numbers should tell you that - the financial crisis is totalled at around $4.5tr.

The UK's liabilities from it are - what £200bn?

If you just work it out, paying one pound every second, it would take you ... what ... 6341 years to pay that off.

That's just nowhere near the pension bill for even the whole of the UK population, let alone for the few public sector employees who will get their pensions.

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Can I just say, I want to nip this little f*&ker in the bud. The size of the financial crisis next to the size of the public debt for pensions is incomparable. One look at the numbers should tell you that - the financial crisis is totalled at around $4.5tr.

The UK's liabilities from it are - what £200bn?

If you just work it out, paying one pound every second, it would take you ... what ... 6341 years to pay that off.

That's just nowhere near the pension bill for even the whole of the UK population, let alone for the few public sector employees who will get their pensions.

I thought the $4.5 Tr bill was the international cost, not just ours?

If so its an apples and oranges comparison.

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QE exists because the government cannot pay the banks back for the money THEY borrowed. It always was a sovereign crisis.

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Foxx news among others has really been hammering on about public-sector pensions, as if all of the USA's financial problems are caused by them. No mention at all of the banking system.

Uh, that's because most of the local government bankruptcies are caused by unaffordable public-sector pension promises.

Government workers promising to pay themselves several times the average income every year after they retire at 55 is not affordable, and never was. It's looting, pure and simple.

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Can I just say, I want to nip this little f*&ker in the bud. The size of the financial crisis next to the size of the public debt for pensions is incomparable. One look at the numbers should tell you that - the financial crisis is totalled at around $4.5tr.

The UK's liabilities from it are - what £200bn?

If you just work it out, paying one pound every second, it would take you ... what ... 6341 years to pay that off.

That's just nowhere near the pension bill for even the whole of the UK population, let alone for the few public sector employees who will get their pensions.

Pension funds, including public sector ones, were more than a bit part player in the financial crisis though. It was pension funds that chased asset prices, like commercial property, through the roof seeking ever bigger returns to sustain themselves.

I would say also that public sector pension funds, more than anyone else, were responsible for high shop rents on the high st. I suspect many councils would cite pensions costs as a motive for depositing funds in high interest Icelandic accounts. It's very easy to push the concept public sector pension funds are benign custodians of hard-earned frontline worker's retirement money and everything is the nasty banks' fault but that's not reality by a long chalk.

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Unless mass default is allowed by the state and the public they are going to loot everything they can get their hands on by any means possible. Either way we are absolutely ******ed.

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Unless mass default is allowed by the state and the public they are going to loot everything they can get their hands on by any means possible. Either way we are absolutely ******ed.

I read this out and the Mrs said she thought we were going to get both.

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Pension funds, including public sector ones, were more than a bit part player in the financial crisis though. It was pension funds that chased asset prices, like commercial property, through the roof seeking ever bigger returns to sustain themselves.

I would say also that public sector pension funds, more than anyone else, were responsible for high shop rents on the high st. I suspect many councils would cite pensions costs as a motive for depositing funds in high interest Icelandic accounts. It's very easy to push the concept public sector pension funds are benign custodians of hard-earned frontline worker's retirement money and everything is the nasty banks' fault but that's not reality by a long chalk.

There are lots of different pension funds in government.

Some are 100% funded, for example the research council pension fund.

The local government pension fund is funded with £120b of assets but certain authorities (Birmingham being the worst) are showing a deficit.

Teachers and Central Government civil service are completely unfunded and rely on current contributions to pay past members. Quite why people in local government have to pay almost twice that of central government civil servants has never been fully explained.

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There are lots of different pension funds in government.

Some are 100% funded, for example the research council pension fund.

The local government pension fund is funded with £120b of assets but certain authorities (Birmingham being the worst) are showing a deficit.

Teachers and Central Government civil service are completely unfunded and rely on current contributions to pay past members. Quite why people in local government have to pay almost twice that of central government civil servants has never been fully explained.

The issue with pension promises, is that they are calculated with serious ever growing returns being possible.

clearly, there are no martians contributing to our pensions, so there is only one source...US...and if we promise ourselves exponential growth, that beats inflation, then payouts that keep up with inflation, then clearly, someone has to go short.

Public Sector being 40% of the workforce IIRC, then exponential payouts for 30 years worth of retirees, is mathematically impossible without debasing the currency...which leads to more inflation and more pension costs.

Exponentials...they are a real *******.

Edited by Bloo Loo

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There are lots of different pension funds in government.

Some are 100% funded, for example the research council pension fund.

The local government pension fund is funded with £120b of assets but certain authorities (Birmingham being the worst) are showing a deficit.

Teachers and Central Government civil service are completely unfunded and rely on current contributions to pay past members. Quite why people in local government have to pay almost twice that of central government civil servants has never been fully explained.

This 100‰ funded research council fund, are there still members making contributions? At what sort of level? If so, how much tax money also goes in?

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It is interesting to see how they are tackling this in France. The pension system is completely unreformable so they are simply ratcheting up tax on retired people, this isn't a bad plan because it makes boomers pay for their early retirement rather than saying we'll make the young pay by forcing them to retire later.

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It is interesting to see how they are tackling this in France. The pension system is completely unreformable so they are simply ratcheting up tax on retired people, this isn't a bad plan because it makes boomers pay for their early retirement rather than saying we'll make the young pay by forcing them to retire later.

I've been saying this for a while.

Simply introduce a special tax on public sector pensions.

Public sector loves taxes, don't they? So no problems at all.

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I do see pensions as a problem - not simply because of the size of the unpayable liabilities as a result of promises by people who were never going to be around to fulfil them (weak leadership from all concerned, public and private)....but from another angle.

These huge and growing pools of savings bid up asset prices and literally hunt the rest of us down for a yield. More of this money needs to be circulating in the economy as demand now, rather than as investments. China pales into comparison with our own savings pools.

I would get rid of them entirely - give people their money back (what there is) and let people save in instant access Super ISAs, which they would have to draw on first throughtout their lives. If people spend it, all well and good- it will provide a good boost to the economy.

A decent state pension for all paid out on a pay-as-you basis should be what we should aim for.

(btw - I used be off a totally diametric opinion to this - until I concluded these pensions do more harm than good, benefit the rich more than anyone, and can never be run without being gouged)

Pensions are immune from seizure during bankruptcy...ISAs are not.....your super ISA would have to be a pension fund of some sort to protect these future cost covering instruments.

and lets not forget, when a pension fund BUYS and asset for its investment potential, there was a willing SELLER on the other side, so the money DOES go back into the economy, at least for one more pass, and this money itself will be looking for some spending or work to do.

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I do see pensions as a problem - not simply because of the size of the unpayable liabilities as a result of promises by people who were never going to be around to fulfil them (weak leadership from all concerned, public and private)....but from another angle.

These huge and growing pools of savings bid up asset prices and literally hunt the rest of us down for a yield. More of this money needs to be circulating in the economy as demand now, rather than as investments. China pales into comparison with our own savings pools.

I would get rid of them entirely - give people their money back (what there is) and let people save in instant access Super ISAs, which they would have to draw on first throughtout their lives. If people spend it, all well and good- it will provide a good boost to the economy.

A decent state pension for all paid out on a pay-as-you basis should be what we should aim for.

(btw - I used be off a totally diametric opinion to this - until I concluded these pensions do more harm than good, benefit the rich more than anyone, and can never be run without being gouged)

I don't think it makes much difference whether savings are deposited in pension funds, ISA, bank accounts , property, shares etc. They are always going to chase yield and bid up asset prices eventually. Public sector pensions do participate in this process but it is not quite in the straightforward mechanism of pension fund investments some here imagine. That probably does occur with funded schemes such as that run by local government, However, the unfunded schemes such as the NHS, the Civil Service and the State Pension do not directly invest in the market . The mechanism there is indirect as the government simply scoop all the money from contributions paid via NIC or by state employees via deductions from their wages etc into the Treasury pot or use it buy gilts. This then can be used to pay current pension liabilities but it can also used to fund other government spending including all the barmy incentives that governments have come up with over decades to blow housing bubbles so they can win an elections for instance.

Contrary to what many think government and big business love pension s just so long as they do not have to contribute too much to them. Taking peoples money and locking it up in a long term promisory IOU is a great way of controlling the masses and funding their own expenditure. That is why they were invented by people like Bismarck and Lloyd George in the first place. In fact monarchs used pensions as a means of controlling the long term obedience of their servants can be traced back to at least the Tudor period. Governments might use various wheezes and diddles to avoid paying their liabities in full but they know that the day they fail to pay out at all is the day they will probably fall

Edited by stormymonday_2011

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I do see pensions as a problem - not simply because of the size of the unpayable liabilities as a result of promises by people who were never going to be around to fulfil them (weak leadership from all concerned, public and private)....but from another angle.

Try telling the public sector that these obligations are unpayable or unfunded where a fund actually exists. Unfortunately we have a workforce that believe in magic and alchemy and pension administrators and the Government that kick the can down the road.

Meanwhile I have recently had my pension illiustration of benefits payable on my self-employed pension, the illustration is based on the open market option of an index linked annuity at age 55, the same age as the firefighters. The current open market rate for these annuities is 2.1% meaning that the theoretical cost of the fire fighter pension excluding lump sum is £904,761.91 per firefighter....(£19,000 x 100/ 2.1)

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There are lots of different pension funds in government.

Some are 100% funded, for example the research council pension fund.

The local government pension fund is funded with £120b of assets but certain authorities (Birmingham being the worst) are showing a deficit.

Teachers and Central Government civil service are completely unfunded and rely on current contributions to pay past members. Quite why people in local government have to pay almost twice that of central government civil servants has never been fully explained.

How can they know?

They have no ability to project what the sterling value of any asset class will be in 10, 20, 30 years time. They have no idea what the real value of sterling will be for that matter.

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