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> Maybe shackling everyone's retirement outcomes, executive compensation, and economic policy to large private corporation's stock price The alternatives to in
by thworp 2y ago
> Maybe shackling everyone's retirement outcomes, executive compensation, and economic policy to large private corporation's stock price
The alternatives to investment-based pensions do have some trade-offs. Both the tax-based and "public insurance" (current payers finance current pensioners) model are vulnerable to demographic shifts and economic depressions. In many countries with bad demography, the payout you get per income-month has been reduced and the age of retirement increased, because the system threatened to collapse. Since most of the world is now aging rapidly and living longer, these systems are under severe strain.
A significant advantage of pension funds is that they can invest abroad to spread the risk, but in a public system this is impossible.
small nitpick: Pension funds invest only tiny percentages into actual private companies, like the PE firms TFA is referring to.
- PaulHoule 2y agoDoesn’t Norway have a huge public pension fund which is invested internationally? Calpers also invests in “global equities” https://www.calpers.ca.gov/docs/forms-publications/facts-investments.pdf https://www.calpers.ca.gov/docs/forms-publications/facts-inv...
- thworp 2y agoI was replying to a comment which lamented the fact that people's pensions depend on the stock market. I brought up that the alternative - financing current pensioners directly from taxes or an "insurance" fees - also has some large drawbacks. You are probably talking about Norway's sovereign wealth fund[0] (funded by oil revenues); the actual pension fund is only for government employees and structured almost exactly like any non-government pension fund. There are of course many financing models that are some combination of the two, but these models have the exact same problem to the degree that they invest in the stock market. Also, there are very few countries in the world that invest their oil surplus as wisely as Norway. Most democracies would just use the funds to hand out election presents to their voters. [0]: https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...