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More Warnings on Looming Pension Poverty
Submitted by Leo Kolivakis, publisher of Pension Pulse.
This time out of the UK where the FT reports insurer warns on pension savings:
Almost two fifths of those nearing retirement are not saving for it and will face a financial shock when they leave work.
The
Real Retirement Report, released today by Aviva, the UK's largest
insurer, also found that 20 per cent of those aged 55 to 64 still owed
more than £75,000 on their mortgage.
The report found the age group had fewer savings and lower home ownership than the newly and long-term retired.
The Express reports that millions aged 55 to 64 are in a state of denial over pension poverty:
Millions
of “pre-retirees” aged between 55 and 64 are being unrealistic about
the size of their private pensions and living in a state of denial
about their finances, experts say.A study
published today, found 40 per cent of that age group did not manage to
save on a regular basis and had just £8,593 set aside on average – less
than the recently retired and the over-75s, who have savings of around
£13,957 and £18,748, respectively. Researchers found that one in four
pre-retirees has a mortgage and in a fifth of those cases, it is more
than £75,000.Parents are increasingly
remortgaging their homes to help children on to the property ladder or
taking money out of their house to fund spending elsewhere as cash
becomes tight in the recession, experts say.According to insurer Aviva, which carried out the research, retirement is “a worrying time of financial and social change”.
Clive
Bolton, of Aviva Life, said: “This report shows a worrying picture
whereby those who are already retired are actually – to a large extent
– financially better off than the pre-retirees.”A
separate study by Moneyfacts found monthly income from pensions has
plummeted 70 per cent in the past 10 years. A 65-year-old saving £100 a
month for 20 years into a personal pension retiring in January 2000
would have received £9,000 a year, it found.A man saving the same amount of money for the same amount of time retiring 10 years later would receive just £2,542.
What
are these people going to do? Sell their houses, pay off debt, move
into an apartment and live of 4% a year? Even if they invest it and are lucky enough to earn 5% a year, it will take a little over 14 years to double that
money (rule of 72: 72/5=14.4). Of course, they can always work till
they die but that's assuming they'll still have a job.
Maybe
those young City and Wall Street quants can teach them how to trade
these markets using "sophisticated" mathematical models and leveraging
up 40 to 1. Come on guys, grandma needs some juice so she can retire in
dignity. What do you say? Can you teach her how to trade like a hedge
fund pro?
I am being factitious but the situation is getting worse with each
passing year and nobody seems to care. When it hits, a whole generation
will experience pension poverty. It's beyond sad, it's actually
hopeless and highly disconcerting.
Down the road, some politician will say "remember that guy, Leo
Kolivakis, he used to warn us of the looming pension crisis". Only
problem is that it's already too late. Better hope asset reflation
comes back with a vengeance or else we're screwed.
»
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Leo,
I'm trying to understand how you can be bullish on equities and bearish on pension funds. I mean, a natural extension of the first premise would be that pension funds can lever up 100 to 1 and provide all the retirees everything they could possibly want. Managers would have to be stupid not too, right? Of course a few wild swings now and then might wipe out a few funds, but perhaps we could suspend mark to market, or call them "temporary impairments", let them borrow more money, and double down to get it back. Problem solved, right?
Or perhaps there's no such thing as a free lunch, that our production can't keep up with our past promises, and people in developed nations are going to take a hit to their quality of life as this reality sets in.
If this is the case, one hopes that the bullish fund managers who peddled a false bill of goods to the pension suckers (raking in large mgmt fees along the way) would share in the suffering. Or better yet, all of those useless leaches could stop shifting paper around and start providing "services" to those of us that actually produce something.
You might not understand that perspective, but I wanted to point out the seeming contradiction in your statements, and why logically your desired outcome can't possibly happen.
Cheers,
HY
I am bullish on some sectors but on pensions, not so much. They are increasingly investing in private equity, real estate, commodities, hedge funds, anything to garner higher yields but they will remain underfunded because their liabilities are exploding. It's all about asset-liability risk. That's why I'm not so bullish on pensions.
Bloomberg reports the Fed is talking to financial investment firms with an aim of converting over a Trillion dollars of money market funds into equities and or gov. bonds . Bad news for retirees IRAs etc. but great for Wall St and funding massive deficits. In addition to withdrawing MMF FDIC guarantees, you will see maintanance charges and negative returns. The ship is sinking and Captain Maynard Keynes is mandating there will be no survivors
Bloomberg reports the Fed is talking to financial investment firms with an aim of converting over a Trillion dollars of money market funds into equities and or gov. bonds . Bad news for retirees IRAs etc. but great for Wall St and funding massive deficits. In addition to withdrawing MMF FDIC guarantees, you will see maintanance charges and negative returns. The ship is sinking and Captain Maynard Keynes is mandating there will be no survivors
We are at the "generational memory" threshold.
The oldest alive hated banks for good reason.
The young will learn that reason, and sadly, all who have fought and died would be ashamed that the same old signature moves among banks will poison the world. "Nobody alive to remember the hatred, LETS GO!"
As GW would say, "mission accomplished." Now who will be left standing after the next world war?
This whole pension party is a laughing stock.
In poker it's called "betting on the come."
In poker the pensioners are called -- suckers.
You "traders" definitely deserve what you have coming. I wouldn't be near this Hindenburg smoking like you self-professed masters of the dipshit universe.
It doesn't take much to master the sucker crowd.
Read Mises "When Money Dies" It chronicles the German experience from 1913-1940. To finance WW1 Germany thought it would be a good idea to abandon not raise taxes, just deficit spend. By 1920, even before reparations, the old generals pensions had been decimated by currency collapse. Then reparations. The they started assassinating the jewish "moneychangers" that the angry public scapegoated. That was 1920! Then Hitler. Then the 6 million jews and 14 million other undesirables.
Fiscal irresponsibility has a very ugly ending. Owning hard assets, be it gold, farmland, or frontrunning government decisions is your only solution.
People live longer than they're supposed to.
No system can afford someone paying 40 years into it and trying to live another 30 years of the plan.
It never worked. It never had a chance to work. It's been a socialist utopia and the only reason we've believed the lie is due to massive populism and propaganda.
Doesn't it sound grand? You work every day and pay your bills, pay your taxes and at the end of the tunnel there's that carrot dangling that one day, you will not have to go to work and you can stay home and still have a decent life and someone else will have your job, the same stinking job that you hated after 20 years but you stuck with it because of the friggin' pension so you slaved day in and day out only to have that cake at the last day and celebrate your days of retirement.
IT IS A JOKE! ALL SMOKE AND MIRRORS! JUST TO SUBDUE THE MASSES AND KEEP THE PEACEFUL!
Now the pot is empty. Debt is growing to keep people happy and hopeful that the carrot will be there for them at the end of the tunnel. And with that, they're getting their Viagra as well to keep "going" at it. Just so they won't have time to think about how this is all supposed to get paid for in the LONG TERM.
WE NEED A CLEANSE. ALL SOCIALISTS NEED TO BE TARED AND FEATHERED.
God, let common sense rain (reign)!
Well said. It IS a joke.
Like the comment about "fraud street" above, it's one big snow-job on anyone that isn't a trader or investor and I had to laugh picturing the elderly shooting and then being locked up while everyone under 30 watches American Idol wondering what all the fuss is about.
The real crux of the matter of wall street theft (outright, why else won't they show you) is that they get paid by government to steal from the government's constituency!
The business may be dirty, and you might have to shave, but stealing is plain profitable at all levels!
nah run along nothing that a pension fund would want
Value 2000 Avg Price $280/oz = $71,904
Today's Value $290,000!
Boomers have been promised attractive pensions by the high priests of finance and government. It has become an article of faith with them. Trying to persuade them otherwise by logical argument is as much a waste of time as trying to discussing the economics of renewable energy with solar power buffs.
Ummm, good one, come back to be in a year and tell me all about the economics of renewable energy (I prefer to stick with Kleiner Perkins, Citadel, and a few other top funds).
Nice comeback - I expect to be around next year unless I get a life - I think for the top funds the game is more about IRR generated by tax credits than by the viability of the solar plants - and that "Green Jobs" promised are at best a zero sum game generated by taxation.
Thanks for posting the pension articles, I always enjoy reading them.
Bah...
I and my employer been saving for my retirement on a regular basis-15% of pretax income. Its call the Social Security fund.
GHW Bush took out SS and in it's place put an IOU. good luck with that.
I thought you were bullish?
Bullish on some sectors but not bullish on pensions.
good enuff.
I like them 10 & 30 year treasury yields....yummy...buy more stocks Leo... yummy...
Hey Leo, are you the only one that didn't see this coming?
I did, back in 1999. The target shifted to RETIREMENTS AND PENSIONS TO LOOT BY FRAUD STREET!
I pity the elderly, they never saw it coming, their governments set the stage, and investment banking stole everything from their accounts to their future.
Perhaps when the elderly start shooting the youth will actually notice they too have been robbed but I doubt it.
We haven't even seen a stir yet as the masses (globally) live in denial of the crimes on fraud street and government collusion.
Troubling. Given the value of Pension funds is falling as well it looks like we're reaping the crop of a culture built on spending now, worry later.
Of course the whole idea of "retirement age" was that most people wouldn't make it that far, so there would be money to go round. Now that most people do make it (and then keep going) we're going to have to rethink how we provide for ourselves in old age.
One reality is that if all US workers had been saving at a rate necessary to fully fund their retirement, and also put away a little extra on the theory that social security would be cut back quite a bit due to the demographics, then there would have been no cash left to fund the "consumer society," particularly that of the last 10 years. And if the economy had not "prospered," what would have been the outcome? Who knows.
In some ways, this is perfectly normal. Who wants to live like a ant-miser, while every grasshopper around you buys into the heavily marketed American Dream, a bigger house, a bigger SUV, a bigger boat, etc., as the economy ramps higher, the government openly encourages consumer borrowing by keeping rates low, etc.? You can't have both under those circumstances, and financial irresponsibility was clearly the more attractive choice (especially when you were led to believe that cashing out your house someday would be your retirement nest egg).
Then, even if you did manage to put away something, the 401k took a beating, and the gods of finance crashed and had to be bailed out, meaning whatever funds you might have had available to put away would now be taxed away to ensure the comfortable lifestyle of plutocrats, wherein the threat to their own eventual, very comfortable retirement was the true source of the monstrous lie of "systemic risk." You wouldn't one of those guys to have to drink box wine in their villa, now would ya, after all they've done for [to] you?
As for public pensions, this will truly become "blood from a stone" time, as the fat pensions cannot be funded by the taxpayers. The day of reckoning will come at some point, and the answer will be that the amount of those public pensions will be retraded as states and municipalities take funding holidays and skip payments so they can make ends meet. This is not a discussion about what those pensioners deserve, or what they were promised, it is about what can actually be done and paid for. The huge gap between promise and reality will yield to reality at some point (same as with those giant "pensions" we call Social Security and Medicare).
That is basic math, as Denninger likes to say. It is unavoidable, incurable, and relentless.
Leo: I agree with your clarion call that it is a given that the unfunded liabilities will not be funded. So what? What do you expect everyone to do about this? Succumb to mind-numbing taxation to fulfill those promises? Recognize reality like grown-ups, realize default is coming and retrade the deals? where do you think we should go with this.
I have been calling for an international summit on the pension crisis for a long time. The way pensions are being pillaged is truly obscene. It doesn't matter whether they are defined-benefit or defined-contribution plans, they are being pillaged by greedy, ruthless investment bankers, hedge funds, private equity funds, insurance funds, and pension funds. The bullshit going on in today's pension world is truly pathetic. Capitalists have discovered another way of fucking labor - through their pension savings.
I cant take it anymore Leo.
Reflect upon all the jobs and immense amounts of capital outsourced to places with youger population .Those countries will work for much less and have the drive to work hard for technologicaly higher sKills.
THe merger and aquisition feeding frenzy of the past 20 years eliminated millions of workers thar wer redundant in the new corporate business combination. Boomers were let go in droves thus lowering the retirement benefits and medical benifits for the surviving "NewCO"
The jobs were lost. Shipped overseas.We now consume and send the profits back to Asia
While the federal government /corporate piracy was going on the Federal Reserve encouraged anyone to borrow to the hilt with jobs falling, full knowing that they were entering into financial suicide as the jobs left.
This was fraudulent inducement by the central bank to destroy the middle class.
http://solari.com/blog/?p=2058
Catherine Austin Fitts is entitled to all the respect
that Zero hedge can afford her
Sort of a screwed if you set up a retirement fund (due to plundering) screwed if you don't (government safety net is an illusion.)
Looks like the only place you can get a happy ending is a massage parlor.
LOL, is that your advice for retirees? Blow your pension savings on Viagra & "happy endings" at seethy massage parlors? Come to think of it, at least some will die with a smile on their face. :)
Leo your are definitely the clown prince of this message board.
Real deep insight...let me guess...Ivy League education?
I must admit Leo you are such a genuis, by the way how much AUM are you running at this moment?
"Real deep insight"
Leo,
You are the King of real deep. Here is one of your finer moments.
by Leo Kolivakison Sun, 12/13/2009 - 09:46
#161969
And who the hell are you? Another pension pussy or dimwhit invesment banker with his head up his ass?...yeah, that's a classic!
"When it hits, a whole generation will experience pension poverty."
Actually, when it hits a whole society will experience, um, shall we say...social change.
Anybody who thinks that a private majority will continue to endlessly support the lavish pensions of a public minority has got rocks in their head.
Solent Green.
It is a very bad situation. You have many elderly people needing major assitance from their family while the younger members of the family are losing their jobs and taking pay cuts and all the rest. The days of most people leaving an inheritance to their children and being able to support themselves late in life have ended for the most part and its only going to get worse.
The aussies fixed this decades ago with complsory Superannuation. We are too chicken to.
The rationale is that compelling people to save is an infringemnt of their rights.
What about my right not to pay extra tax to support a bunch of lazy old shitbags in retirement?
Yeah, how is that working out for them? Last I checked, they're in the shits too.
You can have asset reflation or, more likely, deflation. That brings the cost of everything down and makes whatever little money you have go further. Of course, if you're leveraged, you're screwed. It's insane that parents are remortgaging their homes to help their kids buy places in London/UK. I live in London and I can say that real estate is still way out of whack. Sure, some hedgies in Mayfair and tycoons from other parts of the world can afford it but no one else can.
The solution is for the cost of housing to come down dramatically, so that the cost of living isn't eating up all of your income. Then new families can get on the property ladder without bankrupting their extended families and eventually the banks. It's ridiculous that people still believe that their home is an investment--it's not, it's a huge expense. The debt merchants think that risking your whole financial future (does anyone have job security?) to put a roof over your head is somehow good for your family. It's plain madness.
As long as most of them are members of AFSCME, fuck 'em.
They didn't do much of anything in their lives to earn it, and spent more than half their time getting their politicians elected. So much so that here in Pennsylvania they claim they didn't know they were doing anything wrong because everybody did it.
Fuck 'em.
And by then that 3630€ will be worth the same as 1000€ now.
But why stress about it he?
SOYLENT GREEN BABY!!
I'm from Belgium and like our president just told us:
U are to pessimistic!! This will only be a problem over 10 years and we still have enough time to solve it!!
Yeah... I actually have 1 pension plan from work, 1 privat prension plan which both are about 120€ in total a month and I also save 250€ a month which I put into several high income funds with a average of 15%. The plan is, I can stop saving for my pension in 5 to 6 years and the income I get from the funds should be able to let the funds grow at the same pace till I'm 60 (I'm now 33)and would be sufficient as a extra on my pension which will be arround 1130€ a month.
The pension fund money should be arround 150.000 which I will than put into something like a Pimco fund which will get me a extra 1000 a month and the funds that have accumelated shoudl ad another 1500 a month making the total of about 3630€ a month.
And next to that, I have my house, I'll also get the house from my parents and maybe I also win the lottery by then :)
These are 'yesterday's' people. Do we have to worry about them?
Bet your marginal tax dollars that they will be YOUR problem in the future.
You don't have to wait for the future for these people to become your problems, they already are your problem. Start visiting nursing homes to find out what's going on. Currently the state of Florida has to be bailed out by the Federal Government to meet its Medicade expenses, never mind whether there's enough money to pay grandma's heating bill with a pension.
Having walked the halls of a few nursing homes in my area I can definitely state that the problem exists today and not tomorrow. The proverbial word is warehousing, as in these people barely know they're alive, but manage to hang on never the less, are fed, diapers changed, the whole gamut.
Pensions deal with paying grannies bills while still mentally cognizant, but the big money is made warehousing the old lady after she has her stroke or heart attack.
The question then becomes is it cheaper to keep them housed in small studio apartments drawing down a pension or housed in nursing homes with staff taking care of them daily.
Either way its gonna be a sad state of affairs as many families try to dump their senior parents off onto the state. Except that we may find that as children have moved in with their parents during this recession, turn about is fair play, and the children may find themselves responsible for the care of their aged parents when the social safety nets are no longer there to provide the funds for this function.
You may find more states enacting so called euthanasia laws like the state of Oregon to help those that wish to travel to the great beyond to do so. Although nearly anyone can commit suicide, once you become a nearly lifeless body that can only drool out one side of your mouth and fill a diaper twice a day, you can create a living will that states you do not wish to be kept alive in this state. Just as you can create a living will to state you do not wished to be kept alive by artificial means.
Leo, do you have any kids? My 11 year old son holds a similar view point as the 14 yo referenced by Mish. He and his fellow 6th graders are going to be able to vote in 7 years! Time for a charismatic leader/demagogue to emerge anyone?
If baby-boomers don't like what's happening now, just wait until the Generation ?! gets to the age where they realize they've been handed a pile of shit for their graduation party ... and collectively decide to follow someone who promises (final) "solutions".
And don't forget Gen X either; I figure the kids are going to blame them as well for not being forceful enough about stopping this abomination.
Anyone who is currently the age of maturity is going to be labeled as a tool, fool & willing dupe. We are going to be mocked, derided and ultimately defenestrated. The next gen will gleefully cut off all benefits/care if the system hasn't already gone tits-up.
Our kids will also have a massive oil shortage to deal with,
which is starting right now. Our (us) #2 and #3
suppliers of oil, Mexico and Venezuela are not only running low, but using more themselves.World to follow
And just like our present financial crisis, our leaders in the years preceding this crisis are completely delusional
and skirting the major issues
Green energy getting out of this mess? Give me a fucking break. A gallon of gas contains 33kwh of energy.
One fucking gallon! California uses 20 million of gas DAILY.
Thats 660 GigaWatt hours of energy in one day. Biofuel that!
Solar is the greatest wealth destruction mechanism ever devised by man. (this is not a shot at you Leo, I am just pointing out how futile it is to try and replace petroleum
energy with solar derived sources)
My point here B9K9, is that our kids are screwed.More so than we can imagine, all because we have had our heads in the sand for 30 years now. So its up to us to make sure
they have some kind of future, any way we can....
Our politiicans certainly don't give a shit about our kids..
only themselves
OK, so if not solar, what's your solution? Can we power the future with righteous indignation from the internet? THAT would be totally awesome.
Ding, ding, ding, ding, ding... We have a winner.
The "Great Unwind" will be initiated by the offspring of the boomers. Boomers will be screwed harder than they tried to screw future generations.
Payback is a real bitch.
Leo;
My grandmother hoarded gold in the 20's. Gave FDR the finger when he came knocking in the 30's and sold at $650. She had a magical little laugh when she passed out hundred dollar bills during the holidays. She probably would have told you to take your Keynesian fantasy and shove it up your ass.
She was laughing at you for taking the dollars instead of the gold. She sounds like a terrible, terrible woman.
She was laughing because she didn't fall for FDR's THIEVERY.