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If you want to blame someone, blame the accountants. Pension funds' liabilities are long-term and inflation linked. If they had invested fully in inflation-inde

If you want to blame someone, blame the accountants. Pension funds' liabilities are long-term and inflation linked. If they had invested fully in inflation-indexed bonds (as the Bank of England pension scheme does), they would mostly be alright now. But pension fund accounting allowed them other options. During the 1990s and 2000s, pension funds underfunded their liabilities, assuming they'd be able to make up the difference from gains in equities, property and other high-yielding assets. In the process they created quite a few hedge fund billionaires and funded the venture-capital tech boom. Many of those investments subsequently turned sour. But their most significant error was to assume that bond yields would stay high. Today's low yields mean that they can't discount their future liabilities as heavily. The icing on the cake has been a moderate increase in longevity, which has been enough to tip the whole industry into crisis.

gaius 10y ago
During the 1990s and 2000s, pension funds underfunded their liabilities, assuming they'd be able to make up the difference from gains in equities, property and other high-yielding asset Not in the UK - if a company is deemed to be overpaying, according to the Revenue, they pay tax penalties. The Revenue don't care that the value of investments can go down as well as up, their pensions are paid from taxation...
- soVeryTired 10y ago
  BHS and a number of others took contribution holidays in the 90's, on the back of a stock market boom. It's those that I was referring to.
  - gaius 10y ago
    They had no choice, because of the rules I mentioned. The Revenue deemed their pensions "over-funded".
    - soVeryTired 10y ago
      If you've got a link explaining the tax rules I'd be interested to see it. Seems to me like companies should prudently fund their pension obligations before minimising their tax bill.

gaius 10y ago

During the 1990s and 2000s, pension funds underfunded their liabilities, assuming they'd be able to make up the difference from gains in equities, property and other high-yielding asset Not in the UK - if a company is deemed to be overpaying, according to the Revenue, they pay tax penalties. The Revenue don't care that the value of investments can go down as well as up, their pensions are paid from taxation...

soVeryTired 10y ago
BHS and a number of others took contribution holidays in the 90's, on the back of a stock market boom. It's those that I was referring to.
- gaius 10y ago
  They had no choice, because of the rules I mentioned. The Revenue deemed their pensions "over-funded".
  - soVeryTired 10y ago
    If you've got a link explaining the tax rules I'd be interested to see it. Seems to me like companies should prudently fund their pension obligations before minimising their tax bill.