Wednesday, June 22, 2016

Sub prime loans were a disaster. Pension commitments could be a lot worse

I have been writing a lot about the pension mess and it is consequences. This was about the impact on the NHS and this was a more overall view of the problems..

The financial services company Citi  found that for the 20 OECD countries the value of unfunded or underfunded pension liabilities  (just for public sector employees) is a staggering $78tn.

Let’s just write that out in full. $78,000,000,000,000 

This figure is nearly double the $44tn published national debt number.

At the moment the average public sector pension cost-to-GDP is 9.5%.

Citi's research  found most corporate pension plans in the US and UK are underfunded, with an aggregate 18% deficit.

I suspect that all these numbers are just merging into a blur. What the hell does it matter to me?

Well it goes like this.

It will take an ever increasing amount more money from the coffers of companies and government to pay for it pension liabilities. This will lead to the demise of some companies and for others they become like a zombie, only existing to pay their pensioners, never generating enough funds to grow their business.

 For governments it means they will have to squeeze expenditure on other things, like education and health, to keep paying the pension contributions of its old employees.

Now can you see how the commitments from the past distort the future options? Dick Stroud

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