Value of state's unfunded social welfare pensions: €359 billion

[Duke of Marmalade]

There is not much point in building up massive contingency funds for pensions - at the first sign of a crisis, no matter what, they would be raided and spent on whatever that day's issue was

No politician could withstand the pressure to raid the funds to provide for X, even though the funds are ring-fenced for Y

I think this is the point. Ring fenced funding is an illusion at a national level. It is not to say that nations should not invest. But investing vast sums in foreign equities would generally not make the best economic sense and saying these belong to oldies and no-one else dare touch them makes even less sense.

 

[Protocol]

The ageing society / sustainability issue sort of implies that we should do some pre-funding of State and/or PS pensions.

Yet others here don't agree.

I have often wondered is there and argument to pre-fund the PS pensions?

To slowly convert them from unfunded to funded pensions?

Maybe have all new entrants join a funded PS scheme?

 

[Duke of Marmalade]

Yes, but my question is specifically about PS pensions, not the State Pension.

Is there an argument to move towards funded PS pensions, rather than PAYG?

Let us dismiss the idea that because we have set aside a fund the State will be able to pay these obligations even if we can't afford it in the socio-political sense. I agree with @joe sod that this is delusion.
So maybe the argument is that the fund will enable us to afford it by adding to the nation's wealth. That raises the question of what funded the fund. If it was borrowing then we had taken on a massive geared investment, a gamble which would have paid off as we see it now but not in say 2008 and would we really have been able to borrow a further, say, 200bn* on the capital markets? So that leaves taxation. An extra 200bn taken out** of the economy would almost surely have been macro-economic vandalism.

* assuming we would have needed to invest c. 200bn to have the current 359bn
** unless of course it was reinvested in the economy (was the economy capable of servicing that investment?), but I think most in this parish are thinking foreign equities

 

[Brendan Burgess]

So maybe the argument is that the fund will enable us to afford it by adding to the nation's wealth. That raises the question of what funded the fund. If it was borrowing then we had taken on a massive geared investment,

Hi Duke

Good question.

Borrowing the money makes no sense as you point out.

We need to raise the PRSI contributions substantially.

So what would we do with them?

I see three options:

1) Put them in a pension reserve fund - makes no sense when we have €200 bn of national debt.
2) Pay down our national debt so that we would be in a better position to pay the COAP
3) Put them in individual accounts so that the individual decides what to do with them.

Brendan

 

[Duke of Marmalade]

Hi Duke

Good question.

Borrowing the money makes no sense as you point out.

We need to raise the PRSI contributions substantially.

So what would we do with them?

I see three options:

1) Put them in a pension reserve fund - makes no sense when we have €200 bn of national debt.
2) Pay down our national debt so that we would be in a better position to pay the COAP
3) Put them in individual accounts so that the individual decides what to do with them.

Brendan

3) is interesting. It is the most likely to ensure it is ring fenced. Not absolutely guaranteed. If workers are qu'ing at food banks the Government would have to find a way to raid these accounts.

 

[Purple]

3) is interesting. It is the most likely to ensure it is ring fenced. Not absolutely guaranteed. If workers are qu'ing at food banks the Government would have to find a way to raid these accounts.

Many non-Federal Public Sector employees in the USA have their own pension funds and nearly all are grossly under funded. It's an interesting way of seeing the liability crystallised.