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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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On major change that will occur in the US is that retirees will go and live with their children. The downside to this, of course, is that few children will want mom and dad to come and live with them and they'll be a financial burden to their children. On the positive side though, mom and dad can help rear their grandchildren and reduce the labor load around the house. I personally think this is a very positive change. I think one of the greatest social consequences of the pension system is that it has lent itself to disintegration of the family with grandma and grandpa sometimes living thousands of miles away. With grandma and grandpa living with their children, I personally think this will be a very positive development of western societies.
One possible reason so many pre-retirees have not saved is that perhaps they have nothing left over at the end of the day to save because inflation is squeezing every dollar out of their accounts. Every time this issue is raised, it's framed in such a way to place the blame on the ordinary folks whose salaries were insufficient to meet all the demands placed on them. Let's suppose they were spending too much on silly unnecessary stuff. What if they were prudent and squirreled money away instead of spending it. Consumption would be less and the economy would not have delivered as much growth.
No matter how you slice it, it seems to me we are trying to extract more wealth out of the economy than what it is capable of. The illusion is wearing thin and reality is asserting itself. Population growth means less resources spread thinner amongst more people and this will only get more pronounced as the finite resources are consumed at a faster rate. There is no wealth creation. Just a lot of wealth redistribution.
friend he is talking about pensions .. the promise of a retirement .. what ever the size .. money put away .. being lost by poor investment decisions unfunded for the most part .. by the decision makers who used a portion of the funds to divert to something else
how many pensions are tied to governments .. on the brink..
the little side journey you just wnet down is a rambling excuse for the theme.. pensions
they are on the cusp of folding over .. unable to pay the promises . already made .
money squirreled away in pension benefiets ready to be brxed to death
bacause of brain starved pension managers .. and less than forward looking pension analysist that are clue less . lol
I apologize for the rambling. I see the pension tsunami as a window into the failings of the economy as a whole. Under funded pensions relied on an assumed rate of return that is unrealistic and now they are scrambling to make up the difference by taking on more risk, making them even more vulnerable to losses. I'm forming the belief that even with pension reforms and the best asset managers at the helm, they will still be under funded. And as much as I like gold, I agree with Leo in that the solution isn't for the pension plans of the world to all pile into gold and silver. I don't see how that is a realistic road to go down. I'm not sure what the fix is but something has gone very wrong globally and the pension tension is a symptom of it. Going off the gold standard was not wise IMHO.
A more cynical person might describe pensions as simply another embodiment of the classical Ponzi scheme. One where the employee's gullibility and exploitability is tested by the employer.
"We promise to pay you a stream of payments beginning so far into the future, that we have no business making such a stupid promise. According to most statistics, we probably won't even be in business any longer, at least not in the current legal form. Do you accept?"
Funny now that the writing is on the wall and at a distance from which even the legally blind could read, people start to complain. There is nothing that can be done about it; it is an unavoidable tragedy that will haunt our culture for decades and bring about the most intense inter-generational class warfare ever seen in western civilization.
The biggest problem with our pension system is the pig in the python.
The system as it is works fine as long as our population pyramid is a ... pyramid! Right now there's a huge bulge. Not good. We've known about this since 1945 but for some reason, society always has to wait for the crisis to hit to do anyting about it.
Anyway, I'm not convinced anything could have been done to fund that cohort's retirement. Had they saved more, the economy would have been smaller and they would have had less money to save. If you look at history, the cost of living has always been equal to income for more than 90% of people. Today is no different. That's why the system has mostly been pay as you go. They knew about the bulge and introduced some funding criteria but even with full funding you could just end up with more money and a lack of services.
IMO, Boomers could have kept their lives smaller, making sure their houses were paid off. They could have stocked up on long term staples and could have invested in services they would need during their retirement years. They did not. Instead they filled up the dump and the infrastructure is crumbling. They prefered to invest in luxury crap and youth centric products.
Now they will try to make Gen-X and Gen-Y pay for their excesses... fees and taxes on everything. Government will bailout everything. If they do this, inflation will soar and their purchasing power will dwindle.
The all knowing Bernanke must FEEL GOOD about the 100% tax that he has forced on savings....
0% Interest
This means that even the people that did things right and saved .....get nothing for it...and are forced to redistrubute their savings on riskier endeavors ....
FY Bernanke ....Greenspan
THIS.....IS WRONG....
Eventually Americans must wake and realize that capitalism isn't synonymous with twelve unelected FOMC members voting eight times per year on how much real wealth to extract from the peons.
- Heretic
Leo... Keep all of us focused on the pension issues in every country - these funds have been pillaged by the chase for the impossible.
An equal catastrophe will befall many of us if our parents don't have the decency to die in their 70's and we end up with the mother with Alzheimer's.
Remember, that "chase for the impossible" was necessitated by the demands of the now-retiring or soon-to-try-retiring groups. That taking on of leverage was done to meet pre-set return targets, targets only attainable in a highly inflationary economy.
Any NEW funds should explicitly state their targets as, for example, 2%. That's all. Anyone expecting a cadillac retirement lifestyle had better simply save a greater percentage of their income.
There is nothing to be done now for those present-day and soon-to-be retirees...
Thats because western world (mainly) has lived well beyond it's means for the last 20 years...it's like eating 5 cakes when in fact you could ony afford one...there's way too much debt in the systems, we won't see any asset reflation any time soon. Before we start over, debt will have to be cleansed and defaulted, those who made poor investment/consumption decisions have to go down. It's the only way out- sooner or later - and it will be ugly.
the party is over.
best to buy some gold .. IRA's cash um in take the hit buy gold ... pensions ,, better get them into gold
gold will see a 400-500% appreciation from the point going forward .. overthe next 5 or 6 years
or do nothing .. and watch the values go kuput
read up on jim sinclair ,,, macro views spot on since 250 gold ...
the 60 year experiment with out a gold standard will end .. those with the memory of the real role of money,, austrian economics ,, and the last 300% move up in gold .. should get a moving ...
someday leo will hark back and say didnt dumpster trll us to buy gold.. well i didnt and why,, well cause i was in a sort of jumble of understanding
OMG, how could I not see that gold is the solution to our pension woes? Tsk, tsk, shame on me! Grandmothers around the world, unite & buy some gold so you can prepare for the coming financial calamity!
Leo, with your disdane for gold, you ignore THE major reason for having a significant part of your wealth in gold: Uncle Sam cannot steal it through inflation, banks other corporations can't spend it on CEO salaries, and bond sellers can't default on it.
Yea, I know you are going to claim that Uncle Sam can confiscate it, but Uncle Sam can just as easily confiscate any of your property, and he does every minute of the day through taxation and inflation.
One critical point about this entire retirement issue: For the last 10 years through ZIRP and the FED's low rates the bankers have been stealing from retirees in order to prop up their balance sheets and pay their bonuses. A gold based currency would have allowed these pensioners to invest in bonds without the risk of seeing their principle being inflated away.
Yeah Leo,
Stay away from gold, it goes up 15% annually while the SPY is stuck at the same level as 1998 even after a 70% rally.
Gold is blowing the doors off traditional investements the past 12 years... maybe there is a trend developing?
Oh there is a trend developing but it ain't in gold! Please keep driving forward looking at your rear view mirror, just don't come crying to me when you crash & burn.
Leo,
Lets have it, what trend are you talking about?
Leo, it's not that gold itself is the answer to the looming pension crisis; the real answer is that savings ~ REAL savings, unencumbered by debt ~ have to be re-built.
And that takes years or decades to accomplish. But where were these soon-to-be penurious pensioners when they were making good salaries? They weren't saving. They were spending not only their children's inheritance but their own.
Gold does represent a real, non-debt-linked, non-paper market-dependent method of saving. Had they socked away a fraction of their earnings in gold they wouldn't be in this mess now...
leo .. please ... my mother in law age 90 bought some gold coin .. at 320.. she smiles and is happy to have had a 300 percent increase
lets see your alot wiser, have more experience .. and a leg up on sinclair ... even armstong ,, even some of the top analysist in the room ,
and leo the lion hearted ,, mocks the prospects.
what is it that makes you not understand austrian economics .. the role of gold .. and gold being up in all currencies over the last ten years .
with a guy so brillient ,, you missed the move.. how is that ..
yes the coming financial calamity ,,, or is what you see coming down the road a sunday picnic. 40 states may bankrupt in the usa .. many towns .. and thousands of unfunded pensions.
or is it that let me quess ,, your about 35. with no understanding of austrian economics and would rather throw up platudes for serious problems
the pensions should be buying .. a portion of funds in to gold .
this will protect the grand mothers as they age..
and you leo find some sort of chuckle out of a serious problem ..
if the pension had had a portion of funds into gold over the last ten years .. or even 7.. the return would have given these funds much more stability
your a na sayer about gold ,, and have a queer habit of eating crackers in bed ...
Gold, gold, gold, let's all get hot & horny on gold. Sorry bud, Bre-X left a bad taste in mouths of many Canadians and I fear the same will happen to all you wild gold bugs. And the thought that gold should be an asset class in pension funds is beyond stupid. It only serves to perpetuate the myth of gold as an asset class (when pensions already own gold shares) and allows a few gold speculators like yourself to profit from another gold bubble.
LOL.. Leo, I like your stuff and I share your sentiment on many things but c'mon.. comparing BRE-X and GOLD?
BRE-X was a scam. You know that. Remember the geologist who "accidently" fell from a helicopter..
Anyway, gold is solid. It has intrinsic value. It will go up or at least PRESERVE wealth.
Not much else will and can guarantee that.
Paper is just that.. paper. A note with a promise. Behind the scenes the actors are fighting about who exactly made the promise and is able to keep it.
I'm bullish on gold, silver, platinum, palladium, diamond mining stocks. The companies with cash in the bank and good properties will do well this year imo.
Solar is one of your favs and I'm sorry, I don't share that either with you. Solar could be a fantastic story if the fucking governments would get their heads out their asses and would incentify putting solar on every roof in the South, they'd actually be doing something for the environment. But as you know perhaps, the whole "carbon offset" is a scam supposed to create new levels of taxation for the same consumption as before and no alternatives.
Fuck governments. The smaller the government the better we're all off.
Alright, Bre-X was a scam, and gold may have intrinsic value, but I remain highly skeptical, especially now that every second commercial on TV peddles gold as a safe investment.
I can assure you solars are the future. JA Solar Holdings Co., a Chinese maker of solar power products, reported Thursday that it moved to a fourth-quarter profit as sales soared 66 percent.
Apart from that, volume is picking up on these Chinese solar stocks, so pay attention to this sector:
http://finance.yahoo.com/q/cq?d=v1&s=csiq,jaso,ldk,sol,solf,spwra,stp,tsl,yge
If you can stomach the volatility, then go ahead and invest a portion of your nest egg here. If you can't handle gut wrenching volatitility, avoid the sector altogether and stick to high quality dividend stocks.
I think it's great that the rabid individualist John Galts of the world are the same people who don't want to encourage the spread of solar/wind/hydro power - it would kneecap the giant oil companies, who are in their own way as bad or worse than the Great Satan government.
leo i am not a gold speculator 69 years old .. my pension is my savings ..
i can both chew gum and walk ..
i sold some gold in jan 1980 or 800 bucks ,, so this idea that someone cant time markets is bogus.
the signs were their gold at 300 was a great buy forASSETS..
as far as cashing them in 4 or five oz does just fine
gold is a store of value .. if it backed the money supply peoples savings would be more secure
pensions less subjuct to the fiat parade..
and if the pension manager were on his toes he could have got a lot of the move .but they have been brainwashed by the status quo.. and a geneeration of zit pocked youngsters .. with out a logical answer.. but to mke glaring generalities about the role of gold
as china buys it up as india , russia .. and some of the largest money on the planet are going for gold to protect their wealth
even some with less wealth . have decided to buy.. thus proving over the last ten years that gold has been a solid investment to preserve buying power .
so the gold bashers are talking from a platform of supreme ignorence ,
gold any where in the world can be sold for cash in a new york second ..
this cash should be backed by gold ..
but thanks to nixon who closed the gold window, and the keynesian influence on the fed reserve ... we have problems as far as the eye can see ..
leo your full of it.. what does brx have to do with enron .. or for that matter any other asset class bundled and made to self destruct ..
your false pretensions of knowing the what gold is .. is more than funny it shows you are clueless .
and living in some sort of world that makes little piles of shallow analysis .. into piles of backyard spit.
you have not a clue sorry ..
like i say sinclair with fifty years experience or leo with a wiff of hubris and a twenty gal swimming pool .to float a little boat .. amongst giants in the investment community .
do you have a a pot to pizz in.. or any kind of savings other than some disability income
I am clueless? Spare me with your stupid comments on gold, just like those Goldman guys that were peddling the "commodities as an asset class" to Canadian pension funds that were already long commodity shares in their portfolios. When you do a proper analysis, commodity futures do not diversify your portfolio, and certainly did not limit downside risk in 2008. Gold is euphoria, hyperbole, bullshit peddled by idiots. Every second commercial now is on "how investing in gold will save you". Been there, done that, let's get off this golden goose chase. Gold is not the solution to the pension crisis, it will only exacerbate it.
I agree completely. Gold bugs make all sorts of horrendous mistakes about gold.
1. Gold is money. It isn’t. Try to pay your rent or brokerage margin calls with gold. You can’t
2. Gold is a hedge against the fiat currency. Maybe – if the world turns into Mad Max Beyond Thunderdome. Otherwise, if you’re looking to make a profit off gold then the very moment you need to sell the “precious” metal is the very moment when the so-called scrip you’ve been disdaining is worth its least. If you’ve invested in the safety of gold then why would you dump it for paper cash? Which means you can never dump gold. You have to be buried with it.
3. Gold is limited in supply. So are tree leaves. The truth is that a LOT of gold bugs are over extended in their holdings of gold and when times turn tough they’re forced to dump their holdings. Especially unemotional holders like mutual funds who may be holding 5% of their stakes in the yellow metal and need to get cash fast to save other positions.
4. Gold is rare. Not really. There’s less silver bullion available now than gold. It’s volume barely shrinks in usage but always grows. IGNORE the prophesies of doom from gold mining companies about gold running out. They lie. For their own profit. I know of hundreds of thousands of sq. km. in W. Australia alone where you can stumble over a gold nugget as big as a golf ball (as my friend did) that haven’t even been scratched yet.
5. Gold is real but paper isn’t. The ruse here is not the material but the belief in it. Gold fever and its associated speculation is a sickness far more unstable than the credibility of the fiat currency.
5. Gold is real but paper isn’t. The ruse here is not the material but the belief in it. Gold fever and its associated speculation is a sickness far more unstable than the credibility of the fiat currency.
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What is really odd and funny is that I have 3 little plastic things that have 12 numbers printed on it (credit cards) people considered it money. The funny thing....is that I do not even have to pay back that money if I do not want to.
So when we are talking about money....where does credit cards fall into the picture.
Some quick rebuttals:
1) Gold is money - In the traditional definition of money, yes it is. Unfortunately we don't use the traditional definition anymore, as what currently passes as money fail a couple key tests. Shame really. Nobody I've talked too, outside of internet communities like this one, can even tell me what money is or where it comes from.
2) Gold is a hedge against Fiat currency - The value of gold has proven remarkably stable over most of human history. Recent history is very distorted because gold was/is concentrated in so few hands. Fiat over the course of that same history has always, eventually, gone to zero. Every. Single. Time. I have a 100 Billion zim note on my desk to remind me daily of that fact.
3) Gold is in limited supply - only in the sense that it takes effort and resources to obtain. There is gold in sea water, but it is prohibitively expensive to extract at its current resource equivilent price. Gold is being extracted from the earth at the same time technology for recovery is improving. That technology requires resources and effort to develop, resources and effort to find the ever lower grades of deposits, and then even more extracting the actual product. Fiat? It takes almost zero resources and effort to type numbers into a computer - don't even need to kill trees nowadays!
4) Gold is rare - Partially agree here. The silver story is much more compelling to me than gold. However, gold is rare in the fact that it is in so few hands - the main reason you almost never see it used in private barter. It is also located in many places with HUGE political risks - narrowing the field artificially, but I doubt that risk (nationalizing, big taxes, environmental issues) will ever go away.
5) Gold is real but paper isn't - I take this to mean gold has no counter-party risk. Gold in your safe will always be gold in your safe. Argentinean govt bonds might not be bonds tomorrow if they decide not to pay you back, Lehman stock might go to zero tomorrow, etc.
Does anyof this mean "sell da kidz! buys da goldz!" - of course not. Have priorities for the future and fill the priorities with surplus resources. It is all about risk management and covering as many bases as you feel comfortable with, because the goal is not winning the game - the goal is not losing it.
If Gold is real and paper is not, then doesn't it take a 'belief' to give credence to paper?
No doubt, the perceived value of Gold, like anything else, can fluctuate. The difference is, however, that the value of Gold is determined by market participants; NOT by a select few central bankers. Fiat currency, all fiat currency, goes down in value. Not because it has to go depreciate, but because anyone who has the ability to print free money out of thin air does so. If you want to keep your assets/value in something that is easily printed and devalued, go ahead.
At the end of the day, anyone (Leo) who bashes Gold has never studied Gold's (and fiat money) history. History has demonstrated that Gold has always refuted fiat currency. Instead of preaching and misleading others, go read a little and educate yourselves instead.
your your so full of bravdo ..currency around the world are in a state of rigamorphious ;;
gold over the last ten years has as a fact not hyperbole outperformed all assets classes in many pensions .. property lol . commercial bldgs lol ..
no you have not been their done that ..
you are a mere cypher in the snow ,, with out a clue of the role of gold in history..
you keep this incessent bashing of gold .. and it will be you wiping the egg off your face in the next few years .. you wanna make a kuggerand bet .. i am sure we can arrange the details .. lets put your mouth next to your pocket book and see what develops ..
sinclair over leo the lion .. lol
This is a loooming problem with few solutions
Experts Agree More Downside to Come ..
"Experts"....
Credentialism...
Argumentum ad Vercundiam.
Don't need no "stinkin' experts" to tell me the obvious.
Hello iamned.com! You have more false fronts than the CIA and the KGB put together. I guess site traffic is falling off along with mouse click revenue so you have to come to this site and drag your garbage along with you.
So far instead of making me want to peruse your site you only make me want to avoid it like the plague.
the funny thing is he doesn't seem to have any ads on that site.
I'm not quite sure how he's making money.
Agreed that the RELENTLESS spam is a massive turn off.
This is a parody in how not to promote a site...
clicks must precede ads...
remember zh in the early days?
nonetheless, you'd hope zh would implement a policy for shameless self-promotion of websites.... but wouldn't that be anti- free speech?
Leo, my country Holland has a very expensive pension system, which is facing the same trouble. What is your take on this?
one thing you could do is make all of the foreigners who are living there off of the state, move back to their prospective countries of birth. holland is a white country. not black or arabic. of course everytime this subject is brought up over there, here come the political correctness armies and the diversity is good armies to try and quell this potential uprising of thought processes by the dutch sheep....do you ever stop to wonder why it is people in your own government allow unmitigated and unsubstanciated, and unwise and unbridled immigration to your country, much less all over europe? think about it. why would they allow this to happen? well one of the reasons is to destroy your way of life, to destroy your culture, and to bring you in line with what they want on a world scale. this is why the same thing more or less has happened here in the states. in reality, and unfortunatelty this sort of discussion is still verboten, but in reality, the main reason for all of this is to destroy white western european culture, the only bulwork of humanity left, that can and will stop the new world order, such as it is. now anywone with half a brain can name names and say who is doing what, but on this blog, it is good enough if this, in and of itself is allowed to be posted, which i think probably will not happen, but there is always hope....
Dutch pensions essentially face the same problems others do except they're more "sophisticated" in managing assets AND liabilities, not that it's going to help them when the tsunami hits.
Durable asset reflation will necessarily come with price inflation, so retirees are screwed anyway.
In the same way than subprime homeowner that cannot be saved by low interest payment (it is the principal stupid!), future retirees cannot be saved by high returns (it is the contribution rate stupid!).
Very well stated, which is why I believe there will be a concerted effort to inflate away this problem. Not sure if they will succeed, however. They way they are going about it is by trying to ignite (once again) asset inflation, hoping it will translate into real inflation. Another thing they really need to focus on, apart from raising retirement age & contributions, is bolstering pension governance once and for all.
aren't aging boomers & "pre-retirees" TBTF?
and what of us poor souls who never had a chance for the security of a real pension?
what happens then? isn't an IRA or 401K less secure than a pension?
shouldn't we *all* be TBTF?