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The difficulty with moving to a defined contribution scheme, which makes a tremendous amount of sense, is that the employer-governments actually have to pay the
by bradleyjg 8y ago
The difficulty with moving to a defined contribution scheme, which makes a tremendous amount of sense, is that the employer-governments actually have to pay the costs of their promises instead of kicking the can down the road.
Taxpayers don’t like that because they’d rather pretend to believe that investment returns will fix everything while really just saddling the next generations. Government employees don’t like that because they’d rather have the extravagant promises they can extract, figuring that future governments will find a way to pay them.
If both employees and taxpayers prefer to keep pretending that the Emperor is wearing clothes how many politicians are going to fall on the sword of good government?
- tareqak 8y agoFrom my reading of the article, the pension contributions were already being made in this case (it wasn't clear to me if it was directly made by the teachers or the state). Your concern is a valid one, but I didn't see the state repurposing the pension contributions for something else in this case.
- bradleyjg 8y agoThey make contributions but not nearly large enough contributions as would be required if they used accounting best practices, as for example those that the insurance industry is required to use when calculating reserves for annuities.
- bluGill 8y agoPension contributions have been made. In the best case they are large enough to cover everything. However in all the likely cases they won't have enough money to pay out their promises. If more money went in there would be enough returns with reasonable investments. Or you can chase risky investments and hope that better than average returns pay you back.
- snikeris 8y agoSeems like there is a conflict of interest. Governments are dependent on investment returns or the whole house of cards falls down. Yet they are given the responsibility of regulating the investment markets and controlling the money supply. Quantitative easing led to a massive bull market. What's the downside of a government dependent on increasing asset prices?