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Why are you repeating this propaganda? Pensions are basically just 401k's with the risk spread over a larger pool. You know like insurance. A well run pension

Why are you repeating this propaganda? Pensions are basically just 401k's with the risk spread over a larger pool. You know like insurance. A well run pension assumes a conservative rate of return, a conservative inflation and a life expectancy. Then it funds at a level needed to assure a fixed payout to a portion of its workers. No differently than a 401k, except that its a larger pool capable of absorbing market downturns that happen while people are drawing on it just as it absorbs higher returns. The problem with many of the US pensions were that they were seen as places to raid, or underfunded to gain a slightly better quarterly number, or they were intentionally screwed by wallstreet banks who sold them assets with fixed rates of returns they knew were false. AKA pension plans have been the target of all kinds of fraud, very little of which has been prosecuted. And then there was the propoganda. Which worked really well. Hey do you want a pension which will pay you 50% of your salary for the rest of your life or this $50 a month which will grow at 8% a year and you will retire with $ million dollars you can do anything with? The business were much happier to cut their pension obligations and match their workers with a far less substantial 401k benefits. Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts.

jsight 6y ago
> Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts. I feel like this sentence undermined the rest of them. Even giving them $5k would be better for everyone involved, as now the company wouldn't have to assume the risk and the employee would be able to direct their own investment.
- StillBored 6y ago
  Maybe, the point being that they can claim a similar level of benefits by simply assuming a much higher rate of return (or whatever) and rather than under-funding a pension, for which there are legal requirements they can give the worker less cash in a 401k and claim the same rosy rates of return and benefits. Then when those projections fail and the worker ends up working until they die, or collecting government assistance, the company doesn't have to take any responsibility. But from a company overhead view, the company could just contribute whatever amount they want in a pension too. The problem though is that then they would have to use the conservative numbers and point out that the pension might only be 10% of their salary or some other similarly low value. I think if they put error brackets around the 401k they would look a lot less rosy. Here choose a pension with $ a year, or put the money in a 401k and it may yield $$$$ or it might yield $. In one case you will be able to retire on the beach, in the other you won't be able to retire at all. Or you just go with the safe pension option that lets you retire with the same lifestyle.
closeparen 6y ago
A pension is a debt that the company owes you. Betting your retirement that the company will pay you back is comparable to investing your whole 401k in the company’s bonds. Yes, responsible companies plan ahead and save for their debts. But sometimes they don’t. Sometimes they fail. That’s why there is interest: compensation for risk. Responsible investors don’t take on such enormous counterparty risks with individual counterparties.
- StillBored 6y ago
  Pensions in the US are backed by the pension benefit guaranty corporation https://www.pbgc.gov/ https://www.pbgc.gov/. Which despite the "corporation" in the name, is just another government agency tasked with dealing with failed pensions. Sort of the pension version of the FDIC. edit: And to add to this, the funding of the pension is required to be a separate pot of cash from the operation of the business. There were a number of companies in the 1990's/etc that got in a lot of legal trouble for using their pensions as financing for the business.

jsight 6y ago

> Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts. I feel like this sentence undermined the rest of them. Even giving them $5k would be better for everyone involved, as now the company wouldn't have to assume the risk and the employee would be able to direct their own investment.

StillBored 6y ago
Maybe, the point being that they can claim a similar level of benefits by simply assuming a much higher rate of return (or whatever) and rather than under-funding a pension, for which there are legal requirements they can give the worker less cash in a 401k and claim the same rosy rates of return and benefits. Then when those projections fail and the worker ends up working until they die, or collecting government assistance, the company doesn't have to take any responsibility. But from a company overhead view, the company could just contribute whatever amount they want in a pension too. The problem though is that then they would have to use the conservative numbers and point out that the pension might only be 10% of their salary or some other similarly low value. I think if they put error brackets around the 401k they would look a lot less rosy. Here choose a pension with $ a year, or put the money in a 401k and it may yield $$$$ or it might yield $. In one case you will be able to retire on the beach, in the other you won't be able to retire at all. Or you just go with the safe pension option that lets you retire with the same lifestyle.

closeparen 6y ago

A pension is a debt that the company owes you. Betting your retirement that the company will pay you back is comparable to investing your whole 401k in the company’s bonds. Yes, responsible companies plan ahead and save for their debts. But sometimes they don’t. Sometimes they fail. That’s why there is interest: compensation for risk. Responsible investors don’t take on such enormous counterparty risks with individual counterparties.

StillBored 6y ago
Pensions in the US are backed by the pension benefit guaranty corporation https://www.pbgc.gov/ https://www.pbgc.gov/. Which despite the "corporation" in the name, is just another government agency tasked with dealing with failed pensions. Sort of the pension version of the FDIC. edit: And to add to this, the funding of the pension is required to be a separate pot of cash from the operation of the business. There were a number of companies in the 1990's/etc that got in a lot of legal trouble for using their pensions as financing for the business.