Sunday, April 29, 2012
Private pension schemes are obliged to match liabilities. As yields are pulled down, these private schemes are obliged to purchase more. Effect is to transfer investment funds to government, and also shift -private- pension funds to unfunded government dependent. This is effectively transferring funds out of private companies for the immediate consumption by government. Our government is going through all reserves of capital and replacing with government IOU s. The article doesn't directly state this, but if gilts collapsed, then suddenly UK companies with pensions have to direct even more funding to the government ! This is perverse, the less and less valuable something becomes, the more you are legally obliged to buy...right up to when the pension schemes collapse the host company.