Suchergebnisse

We've all seen those claims around that pensions savings don't, in fact, invest in new assets, new companies. That, instead, the money just goes into buying up second hand pieces of paper which funds the rip off of the City houses (cont. pg 94).There's a reason for this: This has meant that UK-listed companies are receiving just £500m in net investment from pension funds each year.Goldman Sachs said defined benefit (DB) schemes – which pay a fixed income but are largely closed to new savers – are selling £2.5bn of shares per quarter to pay out pensions to retirees.At the same time, defined contribution (DC) pensions – which do not guarantee a specific income but depend on the performance of financial markets – are buying £3bn of equities over the same period.People eat their capital to finance their retirements. This might be done inside a pension fund, a tax wrapper or simply directly and individually. But it is not true that a pension is simply the income made from some pot of money. It's eating into that pot itself, that stock, over time. Therefore it is necessary that those assets - whatever they are, shares, bonds, direct assets like buildings, windmills, anything - be bought from the retiring generation by those now beginning to save themselves.Which is why much of the financial markets is indeed trading second hand pieces of paper. Because this generation of retirees needs to sell the things they invested in 30 and 50 years ago. Any plan based upon an estimation of the gross number is therefore going to be wrong. It is the net which matters. What is left over of the new investment after the old has been purchased? Also, any complaint that The City just trades old paper is entirely missing the point. For, obviously, people need to be able to sell what they've invested in, so there must be a market in old investments, right?

De‐​risking public pension portfolios is a win for future taxpayers who would no longer be on the hook for retiree benefits if pension investments go sour.

Plus: Should libertarians consider employing noble lies when pitching themselves to new potential voters?

This blog is based on an article in the Journal of Social Policy by Łukasz Jurek. Click here to access the article. The decision on when to retire is one of the most complex decisions people make in their lives. It is determined by a wide range of factors: individual (health status, family situation), work-related… Continue reading How the Instability of Pension Systems Affects Retirement Decisions →

In this opening installment of Parkland's two-part blog series on Alberta pensions, the authors examine the history of pension plans in Canada and Alberta, setting the stage for understanding the UCP's pension policies and their current proposal of an Alberta Pension Plan. For a recent history and analysis of the UCP's stance on public pensions, please read the blog "Navigating the UCP's Pension Agenda," by Bob Ascah.

The Sandinista regime cared little about the advanced age of many protestors when it came to imprisoning them, leading to dozens of them arriving at Nicaraguan prisons as political prisoners.

Thanks to recent reforms, most government workers in Florida now enroll in less risky defined contribution plans.

Senator Cassidy proposes the government address looming Social Security insolvency by borrowing funds at the Treasury interest rate and investing them in the stock market. But this device is actually a tax increase, albeit indirect and hidden—it takes resources from the private sector to pay for public benefits.
The post Senator Cassidy's Social Security Solvency Proposal is a Tax on Pension Investments appeared first on American Enterprise Institute - AEI.

In this final installment of Parkland's two-part blog series on Alberta pensions, the author explores the UCP's stance on public pensions, offering context from Alberta's recent history to frame the discussion of the Alberta Pension Plan proposal. For a history of pension plans in Canada and Alberta, please read the blog "Ensuring Dignity in Retirement," by Baldwin Reichwein, Richard Ramsay, and Jake Kuiken.

Pensions are an important component of total compensation for most employees but particularly for public school teachers. Teachers tend to have relatively low salaries but retirement benefits that are considerably more generous than in a typical private-sector 401(k) plan. Yet the risk facing teachers is that many teacher pension plans are significantly underfunded, placing their…

When launching its report on an Alberta Pension Plan (APP), the government asked Albertans to "look at the facts" and engage in the discussion. But "facts" are sorely missing in the report—and the invitation to discuss the APP excludes the most important question: do Albertans really want out of the CPP?

Apparently there should be a grand new scheme for pensions. Which, by centralising pension fund investment decisions would make it much, much, easier for the political classes to direct pension fund investment decisions. Even if no one else does we see a little problem in that. But here's what makes this plan rank well up there in the Annals of Chutzpah:A series of changes were made in the early 2000s to a UK pension system that, while imperfect, was largely working for both its members and the companies that sponsored them. There were three specific changes that had a profound negative impact over the following two decades and leading to the situation we have today.First, in 1997 the government eliminated the dividend tax credit to encourage companies to reinvest profits rather than pay them out in dividends. An unintended impact of the move was to make it less attractive for UK pension funds to hold shares in listed UK companies.Second, in 2003 legislation converted what had previously been natural risk-sharing between employers and employees with respect to pension payments into a "hardened" contractual obligation for companies, covering all obligations of their pension funds.Third, with pension-fund obligations now having the status of a hard liability for employers, the Accounting Standards Board introduced new requirements for UK companies to include pension-fund assets and liabilities on their balance sheets. Through this change, assets would be shown annually at prevailing market value (that is, with no allowance for future returns) and, crucially, total future pension liabilities would be discounted by, in effect, a fluctuating long-term bond rate.That is, Britain had a perfectly good pensions system which was entirely and wholly ruined by the government of the time - Proprietor one T. Blair at that very time. However much bullied by one Brown, G., that was who was PM. The answer to the problems created by this is a New Grand Plan from the new minions of Blair, T., which will entirely solve everything and have no ill side effects unlike the last one, no siree!Please do call us Mr. Picky here if that's the way you want to roll but we just can't help but think that perhaps undoing the past mistakes, now they're properly identified, might be a better idea than making a whole load of new mistakes. Perhaps that's Mssrs. Picky given that we use the communal voice here.

….Now have their eyes set on other peoples' pensions.Will Hutton tells us that the UK pensions market is just terrible, not enough investment in actually growing British companies and therefore the state must direct matters:….in 1990 UK pension funds owned more than £1tn worth of UK companies; now they hold less than £100bn. Increasingly, they invest in safety-first government bonds or in destinations overseas…….Absurdly, Britain has tens of thousands of pension funds: they are too small – they must all be consolidated into super pension funds, modelled on the existing Pension Protection Fund (PPF), which can spread risk……..A proportion – say, 5% – of pension fund assets should be organised collectively in a national growth fund to invest in startups, and backstopped by a public wealth fund.And so on. As we can see, the base idea here is that more of our pension savings should be directed to where people like Will Hutton get to determine. Oh joy, eh? All of this managing to entirely, wholly and completely, ignore what has actually happened here. The combination of demographic change and Gordon Brown's varied raids upon defined benefit pensions funds mean that defined pensions benefit funds don't, really, exist. Exist in the sense that they are still taking in new money, in volume, which they'll then invest for 50 years to pay out as pensions when the time comes. Those that do still exist are, pretty much, in run off. That's why they're in bonds, not equities. They're paying out the money saved 30 years ago to the 75 year olds of today. Bonds suit that risk/cashflow profile better than equities.The pensions that are still accruing current cash for future liabilities are defined contribution funds. Where the investment decision relies upon the individual, not the fund management caste. We do, after all, decide where our pensions savings go these days. Which means that that problem of under-investment at home is also already solved. That one mention of "invisible hand" in Wealth of Nations is on exactly this point. Individuals tend to invest more at home than is justified by a strict economic appraisal - thus the move from defined benefit to defined contribution pensions funds is going to increase domestic investment.The problem is already solved. But of course this doesn't stop the galactic megabrains from thinking that they should indeed be directing all. Some more Smith: What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.How prescient of Adam Smith to describe Will Hutton two and a half centuries before the fact.

Too much of our pensions are invested in dead money - bonds - where they sit waiting for interest.We need to see more invested in live money - equities - where they can support ideas and create jobs.Not that corporate bonds are dead money of course, they finance companies just as much as equities do. A different layer of the stack possibly but still financing economic activity. What is meant is that mountain of Gilts, that Treasury debt, which sits in British pensions funds.And, well, OK. So, why do pensions funds carry those gilts? Why aren't they in those equities - or corporate bonds. Equities and corporate bonds do carry higher returns, so we'd expect pensions maximising money managers to be in them. Why aren't they? Gordon Brown, basically.He abolished the tax exemption on dividends. He - and the Major admin as well to some extent - also insisted that direct benefit pension funds must hold many more gilts. The two effects together meant that pensions funds did flow out of equities and into gilts. So, if we wish to reverse that process then we should reverse those two actions. Great, that's dealt with then. We might also suggest this as a more general principle for government policy as well. It's often useful to solve problems by unpicking the mistakes of past administrations. Actually, we think that could well be the most useful thing to be done. Not another layering on of a new and better set of mistakes, instead a removal of the errors of the last lot. Which there must have been, obviously, otherwise there wouldn't have been that change of power at the last election, would there?

Olivia Mitchell, PhD, a Senior Fellow at the Leonard Davis Institute of Health Economics (LDI) and Professor at the University of Pennsylvania's Wharton School, has been named a 2023 Distinguished Fellow at the American Economic Association (AEA). Executive Director of the Wharton Pension Research Council and Director of Wharton's Boettner Center on Pensions and Retirement […]