Friday 31 August 2012

A Stormy Future And Not Just The Weather

It wasn’t just the Babyboomers generation it was that of their parents as well.  This earlier one had seen the backend of the Great Crash and World War 2 together with all the consequential wars and conflicts.  What they wanted was jobs, housing and at the end of their working life, pensions that gave enough to live on with dignity.

This is what the politicians and the rest were expected to deliver and anyone and to say anything otherwise was offensive, false and you could forget any career or prospects in politics at any level.

There are now a number of critics and others that are saying that the pensions part of the deal has gone badly wrong for many reasons and that the hopes and ambitions of the two generations concerned may not be fulfilled and that the generations following are likely to have to settle for much less at greater cost.

Automatic Earth has run the latest bout of pessimism about this under the title of “The Global Demise of Pensions Plans”:

It is a long post with a good deal of discussion and says at the end:


There is no need to explain how tough it will be for many people to see 15% cut off their fixed income. And that will be just the beginning. Some pensions plans may temporarily do better if and when they're allowed to invest in risk(ier) assets, but just as many will do worse for that exact same reason. Changing coverage ratio calculations is not a magic wand; it's just another layer of creative accounting, and we've already got plenty of that.

For younger generations, which over a broad range have lower income jobs, if they have any, seeing pension plan premiums rise 28%, and then some more and so on, will become unacceptable, fast. They will soon figure out that the chances they will ever get any pension decades from now are close to zero. So they’ll ask themselves why they should pay any premiums, from the pretty dismal wages they make in the first place.

Over the next few years, this is a battle that will play out in our societies, and it will have no winners. We need to be very careful not to let it tear those societies apart. In a world where just about everyone has to settle for much less than they have or thought they would have, that will not be easy.

Realistic accounting standards would be a good first step, but they will also be very painful. It will be very tempting to hide reality for as long as we can, in the same way we already do with issues ranging from Greece to real estate prices to bank losses to derivatives to our own personal debts.

The best, or even only, advice for those of us who belong to younger generations is: don't count on getting a pension when you reach retirement age. It’ll probably have been moved to age 85 or over by the time you get there anyway.

This is not something that can or will be fixed overnight. It was doomed from the moment baby boomers started producing the number of children they have. It simply hasn't been enough to keep the pension Ponzi going. And those baby boomers, with far too few children to provide for their pensions, have only just started to retire now, as the plans are already in such disarray. I'm sure you can see where this will lead.


There are ample indications in the US that pensions of many in both the private and public sectors are being hammered and obligations or intentions unfulfilled.  In the UK and especially in Europe with some of its generous schemes the damage has been mostly to the private.

There is a general reluctance in the UK and Europe to appreciate that a large part of public sector financial problems arise from the mounting deficits in pension schemes.  It is not just some generous arrangements; there has been a lot of relentless free loading by a few at the tops of the management trees.

In France the new President may well have squeezed the vote because of his promises and pensions and age entitlements.  It is likely that almost anywhere else there will be a reluctance to either recognise or attempt to do much serious about the growing and dangerous risks.

It is the young who are going to pay for all this eventually and they may not want to when they are faced with the bills.  As someone with an occupational pension and who got away with an early retirement I have great discomfort in looking at the figures and the potential difficulties ahead.

We hear about this bubble and that bubble all about to pop but will the pension issue be a matter of just steady decline or another big bust when it hits.

Incidentally, the latest picture from the US National Hurricane Centre looks very pretty but if you don’t like it just look away.


  1. so ban abortion and divorce and you will get taxpayers.
    Currently you could imnport the cream of Greece, Spain and Ireland and they will pay now

  2. This scenario was described to me as long ago as 1986, so the politicos can hardly say that they were unaware or unprepared for this.

    The truth is they either don't give a damn (likely, as long as their own plans are in place courtesy of the taxpayer), they simply don't have a clue what to do (all too likely - they are addle-headed politicians, after all) or they know what needs to be done but are too paralysed with fear to do it. Whatever it may be, we may be certain of one thing - if there is one sure fire way to embark upon the wrong path, the Powers That Be will find it unerringly, as surely as night follows day.

    Our only way forward (it seems to me) is to organise our own affairs despite the help of HMG. That may involve the purchase of gold/silver bullion, laying in stocks of pasta, rice and candles, or simply buying an extra box of 16 gauge shells for Old Betsy hanging over the mantleshelf. Happy days :-)