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It sounds like we're talking about different situations. I'm talking about defined benefit pension schemes for public sector employees, which have a high NPV b

It sounds like we're talking about different situations. I'm talking about defined benefit pension schemes for public sector employees, which have a high NPV but are not accounted for today. People in my city often think that teacher pay is low, but they don't take into account the NPV of this future pension income. It can be rational to borrow from the future, but in the example I'm thinking of it's not that simple because the number of students in my local school district has gone down ~30% during the career of some current teachers. So, even if you assume that: - total comp was set at market level (rather than being the result of school boards being captured by unions), and - market returns are constant you still have the problem that future income will be lower than past income. So a larger and larger percentage of current school district revenue will be paying pensions, meaning less will be available to teach current students.

ggm 4y ago
Yea, you're the other side, where they over-promise some deliverable without the investment fund to back it. From what I'm told, USS, (the superannuation scheme for the universities) in the UK doesn't have that problem (the one which British Airways and British Gas had I believe) because their projected income streams in the future are based on more reasonable assumptions for both future staff inputs, and the value increase in the contributions being made by current (and future) staff. Public sector Defined-benefit pretty much assumes the whole economy exists to fund the debt. Australia had to establish a sovereign investment fund to cover a past unfunded liability for commonwealth employees, most people now are contributions based but there is a cohort who have defined benefit. Remarkably, some of them hate it. I think it must be because of changes in the model: nobody I know in the older set who is on one (admittedly all academics) dislikes it, they're all on a bloody good payout. But when I attend seminars, I am told there are more recent defined-benefits recipients who dont like the deal. I just checked my super (which I will be enacting inside 2-3 years) and the entire last years loss of value has just been replaced: it's like 2022 simply didn't happen, looking at my December 21 to December 22 outcome in value. And this is not some unfunded liability on the state: this is the outcome of being forced to contribute 9% of salary P.A. for the last 35 years, and voluntarily bigging it up to more like 12-15% in the last decade. This isn't "employer contributions" in any sense: I am taxed (or not) on this money on entry. It's my pay, a part of which I am forced to save. Very different model to the UK. The "historical rate of return is 7% since 250 years ago" thing is mostly true it seems. For the princely sum of GBP175 per annum I have been buying what are called "Class 2 National Insurance Contributions" which will become 3/5ths of a UK pension when i am 68, based on an arcane formula for value when you miss years by moving overseas, said value frozen at the moment I enact it: Had I been in almost any other economy, the UK government would apply the triple-lock and keep it in line with CPI, but because I live in australia and they have a dispute between them of many years standing (as Canada does) its frozen in value to the date it begins. Very odd. But, I worked out it is functionally delivering me something akin to 7% as a longterm rate of return on the investment. I consider it a "gilt" in as much as its state backed. I am frequently told by pension tragics I could have done better investing it myself but I'd rather a government gave me an annuity than I tried to make it big on Cryptos and direct share holdings. No lambo for me!

ggm 4y ago

Yea, you're the other side, where they over-promise some deliverable without the investment fund to back it. From what I'm told, USS, (the superannuation scheme for the universities) in the UK doesn't have that problem (the one which British Airways and British Gas had I believe) because their projected income streams in the future are based on more reasonable assumptions for both future staff inputs, and the value increase in the contributions being made by current (and future) staff. Public sector Defined-benefit pretty much assumes the whole economy exists to fund the debt. Australia had to establish a sovereign investment fund to cover a past unfunded liability for commonwealth employees, most people now are contributions based but there is a cohort who have defined benefit. Remarkably, some of them hate it. I think it must be because of changes in the model: nobody I know in the older set who is on one (admittedly all academics) dislikes it, they're all on a bloody good payout. But when I attend seminars, I am told there are more recent defined-benefits recipients who dont like the deal. I just checked my super (which I will be enacting inside 2-3 years) and the entire last years loss of value has just been replaced: it's like 2022 simply didn't happen, looking at my December 21 to December 22 outcome in value. And this is not some unfunded liability on the state: this is the outcome of being forced to contribute 9% of salary P.A. for the last 35 years, and voluntarily bigging it up to more like 12-15% in the last decade. This isn't "employer contributions" in any sense: I am taxed (or not) on this money on entry. It's my pay, a part of which I am forced to save. Very different model to the UK. The "historical rate of return is 7% since 250 years ago" thing is mostly true it seems. For the princely sum of GBP175 per annum I have been buying what are called "Class 2 National Insurance Contributions" which will become 3/5ths of a UK pension when i am 68, based on an arcane formula for value when you miss years by moving overseas, said value frozen at the moment I enact it: Had I been in almost any other economy, the UK government would apply the triple-lock and keep it in line with CPI, but because I live in australia and they have a dispute between them of many years standing (as Canada does) its frozen in value to the date it begins. Very odd. But, I worked out it is functionally delivering me something akin to 7% as a longterm rate of return on the investment. I consider it a "gilt" in as much as its state backed. I am frequently told by pension tragics I could have done better investing it myself but I'd rather a government gave me an annuity than I tried to make it big on Cryptos and direct share holdings. No lambo for me!