Home » Posts tagged 'pensions' (Page 5)

Tag Archives: pensions

Olduvai
Click on image to purchase

Olduvai III: Catacylsm
Click on image to purchase

Post categories

Post Archives by Category

Pension Crisis In U.S. and Globally Is Unavoidable

April 10, 2017

Pension Crisis In U.S. and Globally Is Unavoidable

Pension Crisis In U.S. and Globally Is Unavoidable

There is a really big crisis coming.

Think about it this way. After 8 years and a 230% stock market advance the pension funds of Dallas, Chicago, and Houston are in severe trouble.

But it isn’t just these municipalities that are in trouble, but also most of the public and private pensions that still operate in the country today.

Currently, many pension funds, like the one in Houston, are scrambling to slightly lower return rates, issue debt, raise taxes or increase contribution limits to fill some of the gaping holes of underfunded liabilities in their plans. The hope is such measures combined with an ongoing bull market, and increased participant contributions, will heal the plans in the future.

This is not likely to be the case.

This problem is not something born of the last “financial crisis,” but rather the culmination of 20-plus years of financial mismanagement.

An April 2016 Moody’s analysis pegged the total 75-year unfunded liability for all state and local pension plans at $3.5 trillion.

That’s the amount not covered by current fund assets, future expected contributions, and investment returns at assumed rates ranging from 3.7% to 4.1%. Another calculation from the American Enterprise Institute comes up with $5.2 trillion, presuming that long-term bond yields average 2.6%.

With employee contribution requirements extremely low, averaging about 15% of payroll, the need to stretch for higher rates of return have put pensions in a precarious position and increases the underfunded status of pensions.

With pension funds already wrestling with largely underfunded liabilities, the shifting demographics are further complicating funding problems.

One of the primary problems continues to be the decline in the ratio of workers per retiree as retirees are living longer (increasing the relative number of retirees), and lower birth rates (decreasing the relative number of workers.)

…click on the above link to read the rest of the article…

The Ticking Time Bomb That Will Wipe Out Virtually Every Pension Fund In America

March 31, 2017

The Ticking Time Bomb That Will Wipe Out Virtually Every Pension Fund In America

Are millions of Americans about to see the big, juicy pensions that they were counting on to fund their golden years go up in flames in the biggest financial disaster in U.S. history? When Bloomberg published an editorial entitled “Pension Crisis Too Big for Markets to Ignore“, it simply confirmed what a lot of people already knew to be true.  Pension funds all over America are woefully underfunded, and they have been pouring mind boggling amounts of money into very risky investments such as Internet stocks and commercial mortgages.  Just like with subprime mortgages in 2008, this is a crisis that everyone can see coming well in advance, and yet nothing is being done about it.

On a day to day basis, Americans generally don’t think very much about pensions.  Most of those that have been promised pensions simply have faith that they will be there when they need them.

Unfortunately, the truth is that pension plans all over the country are severely underfunded, and this has already resulted in local fiascos such as the one that we just witnessed in Dallas.

But what happened in Dallas is just the very small tip of a very large iceberg.  According to Bloomberg, unfunded pension obligations on a national basis “have risen to $1.9 trillion from $292 billion since 2007″…

As was the case with the subprime crisis, the writing appears to be on the wall. And yet calamity has yet to strike. How so? Call it the triumvirate of conspirators – the actuaries, accountants and their accomplices in office. Throw in the law of big numbers, very big numbers, and you get to a disaster in a seemingly permanent state of making. Unfunded pension obligations have risen to $1.9 trillion from $292 billion since 2007.

And of course that $1.9 trillion number is not actually the real number.

 

…click on the above link to read the rest of the article…

Why Energy-Economy Models Produce Overly Optimistic Indications

March 29, 2017

Why Energy-Economy Models Produce Overly Optimistic Indications

I was asked to give a talk to a committee of actuaries who are concerned about modeling the financial future of programs, such as pension plans, given the energy problems that are often discussed. They (and the consultants that they hire) have been using an approach that puts problems far off into the future. I was trying to explain why the approach that they were using didn’t really make sense.

Below are the slides I used, and a little explanation. A PDF of my presentation can be downloaded at this link: The Mirror Image Problem.

Slide 1

FCAS stands for “Fellow of the Casualty Actuarial Society”; MAAA stands for “Member of the American Academy of Actuaries.” Actuaries tend not to be interested in academic degrees.

Slide 2

I try to explain how a more complex situation can be hidden in plain sight.

Slide 3

It is not obvious that both the needs of energy producers and energy consumers should be considered.

Slide 4

If we look back at what the discussions of the time were, we can see when remarks were that prices were too high for consumers, and when they were too low for producers. See for example my article, Oil Supply Limits and the Continuing Financial Crisis and my post, Beginning of the End? Oil Companies Cut Back on Spending. This latter article shows that companies were already cutting back on spending in 2013, when prices appeared to be high, because even at a $100+ per barrel level, they still were not high enough for producers.

Slide 5

Oil companies tend to extract the cheapest and easiest to extract oil first. Eventually, they find that they need to move on to more expensive to extract fields–even with technology enhancements, costs are rising.

…click on the above link to read the rest of the article…

Your pension could be at the center of America’s next financial crisis

March 27, 2017

Your pension could be at the center of America’s next financial crisis

Your pension could be at the center of America's next financial crisis

I’m not a fan of the “greed is good” mentality of Wall Street investment firms. But the next financial crisis that rocks America won’t be driven by bankers behaving badly. It will in fact be driven by pension funds that cannot pay out what they promised to retirees. According to one pension advocacy organization, nearly 1 million working and retired Americans are covered by pension plans at the risk of collapse.

The looming pension crisis is not limited by geography or economic focus. These including former public employees, such as members of South Carolina’s government pension plan, which covers roughly 550,000 people — one out of nine state residents — and is a staggering $24.1 billion in the red. These include former blue collar workers such as roughly 100,000 coal miners who face serious cuts in pension payments and health coverage thanks to a nearly $6 billion shortfall in the plan for the United Mine Workers of America. And when the bill comes due, we will all be in very big trouble.

It’s bad enough to consider the philosophical fallout here, with reneging on the promise of a pension and thus causing even more distrust of bankers and retirement planners. But I’m speaking about a cold, numbers-based perspective that causes a drag on many parts of the American economy. Consider the following.

Pensioners have no flexibility

According to a Bureau of Labor Statistics report from 2015, the average household income of someone older than age 75 is $34,097 and their average expenses exceed that slightly, at $34,382. It is not an exaggeration, then, to say that even a modest reduction in retirement income makes the typical budget of a 75-year-old unsustainable — even when the average budget is far from luxurious at current levels. This inflexibility is a hard financial reality of someone who is no longer able to work and is reliant on means other than labor to make ends meet.

…click on the above link to read the rest of the article…

The Pension Crisis is Global

September 23, 2016

The Pension Crisis is Global 

trudeau-justin

The worldwide pension crisis is the next great notch in the belt of the collapse of socialism. If anyone in the private sector promised workers pensions and did not fund them, they would go to jail and be labelled as a fraud. Yet, this is standard operating procedure for government. Government claims to be some hero for reforming a Ponzi scheme and expects to be hailed by the media whom typically gives them a gold star.

Canadians are now being forced to save more for their retirement, and it does not matter what they want to do personally. As always, the scam involves forcing others to pay more so they can pay today what they promised. Ultimately, what they have done to Canadians is compel changes to benefits from 25% of covered earnings to a third. They also raised the ceiling on covered earnings from what would have been $72,500 in 2025 to $82,700. The bottom-line is rather stark. Some Canadian workers will actually be paying as much as 40% more in CPP contributions by that date.

There is no way they want to revisit this issue again because it created too much kick-back. So the Trudeau government has proclaimed the crisis is over and all is well. These schemes are outright illegal in any private context. This is why Obamacare is also collapsing. He sought to FORCE the youth to buy health insurance that they did not need to pay for others who couldn’t afford it. The scheme is always the same: take from one pocket to pay another.

Asset Recycling – Robbing Pensions to Cover Govt. Costs

April 25, 2016

Asset Recycling – Robbing Pensions to Cover Govt. Costs 

Pension-Crisis

We are facing a pension crisis, thanks to negative interest rates that have destroyed pension funds. Pension funds are a tempting pot of money that government cannot keep its hands out of. The federal government of Canada, for example, is looking to reduce the cost of government by shifting Canada’s mounting infrastructure costs to the private sector. They want to sell or lease stakes in major public assets such as highways, rail lines, and ports. In Canada, they hid a line in last month’s federal budget that revealed that the Liberals are considering making public assets available to non-government investors, such as public pension funds. They will sell the national infrastructure to pension funds, robbing them of the cash they have to fund themselves. This latest trick is being called “asset recycling,” which is simply a system designed to raise money for governments. This idea is surfacing in Europe as well as the United States, especially among cash-strapped states.

The Other Side

3d_text_perspective_10915This is the other side of 2015.75; the peak in government (socialism). Everything from this point forward is a confirmation that these people are in crisis mode. They are rapidly destroying Western culture because they are simply crazy and the people who blindly vote for them are out of their minds. They are destroying the very fabric of society for they cannot see what they are doing nor where this all leads. Once they wipe out the security of the future, the government will crumble to dust to be swept away by history. We deserve what we blindly vote for.

 

“This Is Going To Be A National Crisis” – One Of The Largest U.S. Pension Funds Set To Cut Retiree Benefits

April 20, 2016

“This Is Going To Be A National Crisis” – One Of The Largest U.S. Pension Funds Set To Cut Retiree Benefits

A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits.

As the Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it “projects” it will become officially insolvent by 2025. In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark.

Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income.

Pension funds applying to lower promised benefits is a new development, albeit not unexpected (we warned of this mounting issue numerous times in the past). For many years there existed federal protections which shielded pensions from being cut, but that all changed in December 2014, when folded neatly into a $1.1 trillion government spending bill, was a proposal to allow multi employer pension plans to cut pension benefits so long as they are projected to run out of money in the next 10 to 20 years. Between rising benefit payouts as participants become eligible, the global financial crisis, and the current interest rate environment, it was certainly just a matter of time before these steps were taken to allow pension plans to cut benefits to stave off insolvency.

The Central States Pension Fund is currently paying out $3.46 in pension benefits for every $1 it receives from employers, which has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year.

…click on the above link to read the rest of the article…

$3 Trillion Black Hole Could Destroy Economy: “True Extent of Pension Problem Has Been Obscured”

April 12, 2016

$3 Trillion Black Hole Could Destroy Economy: “True Extent of Pension Problem Has Been Obscured”

global crisis

Yet another reason why taxes are going up,  cities and states are going broke, and the world is approaching financial implosion…

As if the world needed another dangerous and volatile factor in the mix of looming economic downturn.

Unfunded liabilities for pensions have been a problem for a while now, but as investors continue to face fleeting returns, many states and cities are facing the music… and when it stops, there won’t be enough money to go around.

Someone will lose their savings, their standard of living, their retirement and maybe their future. Others will be taxed to death to clean up the mess of the many places were the system is cracked, fissured and falling apart.

According to FT:

The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies.

[…] the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.

Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.”

Mr Nunes…  added: “When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”

Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits.

The inevitable result is, of course, tax increases and spending cuts – potentially on important and vital services.

…click on the above link to read the rest of the article…

Illinois on the Brink of Bankruptcy

April 4, 2016

Illinois on the Brink of Bankruptcy 

The Hunt for Taxes

illinois Button

The pension crisis is brewing and the one state that appears to be heading toward a complete bankruptcy is Illinois. Clients should not own ANY debt from Illinois, be it city, municipal, or state. Just get out before the curtain falls. The Illinois Constitution plainly states that pension benefits, once granted, “shall not be diminished or impaired.” Thus, taxpayers are absolutely screwed and this is not a place you want to own property. Governments cannot negotiate to reduce pensions so state workers will be pitted against taxpayers. The Supreme Court has struck down any attempt to reduce liabilities based upon this clause in the Illinois Constitution.

How Stupid Do You Have To Be To Let This Happen?

March 28, 2016

How Stupid Do You Have To Be To Let This Happen?

So how do we explain this: After World War II most European countries set up generous entitlement systems including government pensions designed to offer dignified retirements to citizens who had worked hard and paid taxes and obeyed the rules for a lifetime. BUT they didn’t bother putting anything aside for the inevitable — and mathematically predictable — retirement of the immense baby boomer generation. Here’s an excerpt from a recent Wall Street Journal article outlining the problem:

Europe Faces Pension Predicament

State-funded pensions are at the heart of Europe’s social-welfare model, insulating people from extreme poverty in old age. Most European countries have set aside almost nothing to pay these benefits, simply funding them each year out of tax revenue. Now, European countries face a demographic tsunami, in the form of a growing mismatch between low birthrates and high longevity, for which few are prepared.Europe’s population of pensioners, already the largest in the world, continues to grow. Looking at Europeans 65 or older who aren’t working, there are 42 for every 100 workers, and this will rise to 65 per 100 by 2060, the European Union’s data agency says. By comparison, the U.S. has 24 nonworking people 65 or over per 100 workers.

“Western European governments are close to bankruptcy because of the pension time bomb,” said Roy Stockell, head of asset management at Ernst & Young. “We have so many baby boomers moving into retirement [with] the expectation that the government will provide.”

…click on the above link to read the rest of the article…

Lagarde – Wants to Raise Retirement Age & Taxes

March 6, 2016

Lagarde – Wants to Raise Retirement Age & Taxes

Lagarde Christine imf

Christine Lagarde remained at the IMF and one of three Troika members because she is a Socialist and on board with both raising retirement ages to cheat people out of what they planned and to raise taxes while closing all borders to the movement of capital. She is also pushing behind the curtain for the SDR to replace the dollar and then the IMF becomes the power behind a one-world currency without ever having to stand for election anywhere.
Lagarde if pitching as a priority the lifting of retirement ages to match her excuse, the increase in longevity gains. People have been taxed their whole lives and governments have squandered that money while making lavish promises. Now Lagarde was retained at the IMF because she can push the Socialist agenda which is robbing the average person while blaming the rich. She does not have to worry about elections so she can do as she likes. Then pension systems around the world world are collapsing not just due to demographics, but the stupidity of government management. Lagarde is looking to use the demographics as the excuse because government have been robbing the people all along while blaming the rich. Lagarde is looking to alter the pension systems by extending the “productive life” expectancy of individuals. Extending the retirement age will allow them to tax you longer in life while shortening your benefit period of retirement. If government was managed properly and honestly, there would be not such crisis had money actually been saved instead of spent.
Largard has been running around the world threatening all tax heavens that they would be blocked from the Swift System if they did not turnover all accounts. She even threaten the Vatican.

…click on the above link to read the rest of the article…

Population Decline in Industrial Countries Requires Immigration?

November 27, 2015

Population Decline in Industrial Countries Requires Immigration?

2-us-population-growth

The United Nations projects that over the next 50 years, the population in the industrialized world (US-Europe-Japan) will DECLINE, not expand. The population is suffering from growing old and the youth are so burdened with taxes they are not getting married (marriages off by 50%) and are not having children. The decline in birth ratesand the migration of people from the outer regions into the old core is typical.

The UN is now supporting immigration to keep the pension funds alive. They have stated that immigration now “require[s] comprehensive reassessments of many established policies and programmes, including those relating to international migration.”

Will Illinois Be the First State to Go Bankrupt?

October 20, 2015

Will Illinois Be the First State to Go Bankrupt?

Illinois

The state of Illinois is in real trouble. The state employees have been bleeding the state dry and are demanding that they raise taxes so they can get theirs. This is the poster state for government employees expropriating private assets. Illinois must pay $560 million in November and they have said they will have to delay the payment to its pension funds. They will also delay payments due in December. We are on the verge of watching state bankruptcy. Once Illinois goes, others will follow to escape pension payments to former state employees.

Pension Shocker: Plans Face $2 Trillion Shortfall, Moody’s Says

July 19, 2015

Pension Shocker: Plans Face $2 Trillion Shortfall, Moody’s Says

Last month, in “Cities, States Shun Moody’s For Blowing The Whistle On Pension Liabilities,” we highlighted a rift between Moody’s and some local governments over the return assumptions for public pension plans.

To recap, when it comes to underfunded pension liabilities, one major concern is that in a world characterized by ZIRP and NIRP, it’s not entirely clear that public pension funds are using realistic investment return assumptions. The lower the return assumption, the larger the unfunded liability. After 2008, Moody’s stopped relying on the investment return assumptions of cities and states opting instead to use its own models. Unsurprisingly, this led the ratings agency to adopt a much less favorable view of state and local government finances and as WSJ reported, rather than admit that their return assumptions are indeed unrealistic, local governments have opted to drop Moody’s instead.

The debate underscores a larger problem in America. Almost half of the states in the union are facingbudget deficits.

Underfunded pension liabilities are one factor, but the reasons for the pervasive shortfall vary from plunging oil revenues to plain old fiscal mismanagement. The pension issue gained national attention after an Illinois Supreme Court decision threw the future of pension reform into question and effectively set a precedent for other states, sending state and local officials back to the drawing board in terms of figuring out how to plug budget gaps. One option is what we have called the “pension ponzi” which involves the issuance of pension obligation bonds. Here is all you need to know about that option:

…click on the above link to read the rest of the article…

 

Post navigation

← Older posts Newer posts →

Olduvai IV: Courage
Click on image to read excerpts

Olduvai II: Exodus
Click on image to purchase

Click on image to purchase @ FriesenPress