Pensions 'Timebomb' - 85% of Pension Funds Will Go Bust

GoldCore's picture

Today’s AM fix was USD 1,311.50, EUR 950.43 & GBP 784.06 per ounce.               

Yesterday’s AM fix was USD 1,324.50, EUR 958.05 & GBP 792.21 per ounce.  

Gold rose $8.90 or 0.68% yesterday, closing at $1,326.70/oz. Silver rose $0.04 or 0.2% yesterday to $19.99/oz.

Gold fell from a three week high today on speculation that very tentative signs of an improving U.S. economy will curb demand for the safe haven. A report yesterday showed U.S. retail sales increased more in March than economists forecast.

Gold in U.S. Dollars - Jan, 2009 to April 15, 2014 - (Thomson Reuters)

Palladium fell nearly  2% today, declining from the highest price since August 2011, after climbing the previous five sessions. Increasing tensions in Ukraine sparked concern that more sanctions will curb raw material supplies from Russia, the largest palladium producer and one of the largest gas exporters.

The worsening geopolitical tensions between Putin’s Kremlin and many governments in the West should support gold bullion and could lead to gold challenging the important psychological level of resistance at $1,400/oz. Gold has rebounded 9.1% this year after the sharp falls of last year.

Gold in U.S. Dollars - 20 Years - Jan, 1994 to April 15, 2014 - (Thomson Reuters)

Pensions 'Timebomb' - 85% of Pension Funds Will Go Bust
The “pensions timebomb” keeps on ticking and as societies we become less prepared by the day.

Yet another report shows that the public pension system is in dire straits. This one comes from renowned investment manager Bridgewater Associates.

The study estimates that public pension funds will earn an annual return of 4% or less in the coming years due to near zero percent interest rates and financial repression. That, in turn, would cause bankruptcy for 85% of the pension funds within 30 years, the study warns.

Public pension plans now have only $3 trillion in assets to invest so that they can pay out $10 trillion of retirement benefits in coming decades, according to Bridgewater. The funds would need an annual investment return of about 9% to meet those obligations, the report says.

Many pension plans assume they will earn 7% to 8% annual returns, an assumption which is far too high. But even in the best case scenario of the pension plans achieving those returns, they will face a 20% shortfall, Bridgewater notes.

Bridewater looked at a range of different market conditions, and in 80% of the scenarios, the pension funds become insolvent within 50 years.

A little notice report issued earlier this year by the Rockefeller Institute of Government says state and local government pension systems have very significant problems.

"Bad incentives and inadequate rules allowed public sector pension underfunding to develop," the study says. "They mask the true costs of pension benefits and encourage underfunding, under-contributing, and excessive risk- taking, trapping pension administrators and government funders in potentially destructive myths and misunderstanding."

It is likely that many pension funds will go bust in the medium term and this may be a crisis that looms large sooner than the Bridgewater research suggests.

Pension funds traditional mix of equities and bonds may under perform in the coming years. Many stock markets appear overvalued after liquidity driven surges in recent years. Bonds offer all time record low yields and are at all time record highs in price. They will fall in value in the coming years.

Pensions allocations to gold are exceptionally low internationally and yet gold has an important role to play in preserving and growing pension wealth over the long term.

Pension funds over exposure solely to paper assets and lack of diversification has cost pension holders dearly in recent years. This will almost certainly continue in the coming years.

Residents in the UK and Ireland, the US, the EU and most countries internationally can invest in gold in a pension - through self administered pension funds. Self administered schemes continue to offer the widest investment choice to company directors and other eligible participants. UK citizens can invest in gold bullion through their Self-Invested Personal Pensions (SIPPs), Irish citizens through their Small Self Administered Schemes (SSAS) and US citizens in their Individual Retirement Accounts (IRAs). If interested, our bullion services team who will take you through the steps required to add the ultimate form of financial insurance to protect your retirement nest egg from the coming pensions timebomb.

To conclude, respected academic and one of the leading researchers on gold in the world, Dr Constantin Gurdgiev, has this to say about the value of gold in pensions:

Gold is a long-term risk management asset, not a speculative one. As such it should be analysed and treated predominantly in the context of its role as a part of a properly structured, risk-balanced and diversified portfolio spanning the full life-cycle of the investment and pension horizon for individual investors and those with pensions – whether they be SIPPs in the UK or IRAs in the USA.”


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D-liverSil-ver's picture

26 yrs. in the same place and got the news last year that our pension was underfunded by a few hundred million.

They worked out a plan to drop the pension but match 100% 401K up to 6% of our pay.

and an additional 8% for 3 years. Even with all of that, it came out to a 33% drop in my retirement money.

MFL8240's picture

The US economy is NOT improving because ONE retail report of buying primarily Foreign Cars was up.  This is absolute bullshit!

Comte d'herblay's picture

Most of them will not go bust.

They are right now paying their pensioners thru the auspiced of the FED.

And will continue to do so FOREVUH.

The worry about pensions is like the Lord Blankfiend worrying about his next bonus. 

FanOfAnn's picture

Under Federal pension law, if a multiemployer pension plan is determined to be in critical or endangered status, the plan must provide notice of this status to participants, beneficiaries, the bargaining parties, the Pension Benefit Guaranty Corporation, and the Department of Labor. This requirement applies when a plan has funding or liquidity problems or both as described in the Federal law. If a plan is in critical status, adjustable benefits may be reduced and no lump sum distributions can be made. Pension plans in critical and endangered status are required to adopt a plan aimed at restoring the financial health of the pension plan.

Angelo Misterioso's picture

FanofAnn - this just applies to Corporate Pension plans, right?

The Governement would never be this strict with themselves and if they were to follow these same rules then all those teacher, fireman and police pension plans would be required to "provide notice" ASAP....they are in "critical status" because their financial backer is technically backrupt (save the printing press....)

orangegeek's picture

hookers, drugs and gambling - that's where pensions need to put their cash

oddjob's picture

No need, bankers and money managers have been spending peoples pensions on those since the 80's. It's all gone.

kanoli's picture

This is exactly what Dr. Antal Fekete predicted many years ago:

Economic Aspects of the Pension Problem

Part 1 :

Part 2 :

Quantum Nucleonics's picture

Not a single pension fund will go bust. Period.  85% of your real tangible net worth will evaporate in the printing of sufficient money to make said pension funds "solvent".

mrpxsytin's picture

Does this mean that retirees will no longer be able to buy themselves RVs and roam around the country in order to better ignore the abysmal living conditions of their children and grandchildren? 

"Kids, we would have blown any chance we had of helping you achieve home ownership, but, well, the Fed beat us to it"

Philalethian's picture

People really should be paying attention to what is happening in their own backyards, and not in every other countries backyard. If they want to war, let them. Stay out of it. Keep American kids home to defend the country from the traitor inflitrators, and coming communist takeover.

This is a powerful report.:



Judge Crater's picture

In this bogus article, not one mention of how yearly management fees of 2% to 4% deplete many pension plans.  Nor mention how pension fund investments were sometimes made at the behest of well-connected placement agents.  The guys who manage public pension funds usually work in the shadows, not much different than thugs in a dark alley waiting for their next victim.

BeetleBailey's picture

SOMEONE LIGHT THIS FUCKING CANDLE!!! - Alan S...atop a big fucking rocket



FredFlintstone's picture

Like the Madoff Ponzi scheme and others, will the legal system allow clawbacks? Should current retirees in bankrupt systems be required to pay back some or all of their ill-gotten gains? There's a question for ya'll.

AdvancingTime's picture

Many of the financial structures we have built are on flimsy foundations or unsustainable. If the wheels come off the financial system pension plans will take a direct hit.

To those who base their future on money coming from these monthly payouts I urge caution, prepare to take a "haircut" or worse. More on why many pensions are at risk and promisies will be broken in the article below.

Lord Koos's picture

These pension funds need to start dealing drugs.

whidbey-2's picture

STrange you should mention this. In Colorado and Washington States a bail out of retirement funds is receiving millions of dollars from sales of MJ to the young workers of those states.  We will shortly see how clever this plan really is.  Soon, it is said, no one will being working in those states thus doing away with retirement. Old age will be fully paid for my MJ sales to......I forget who is buying... oh yes, paid for by Medicaid under the ACA. Obama is a clever social engineer.

yellowsub's picture

What does it matter, we'll be paying for it because it's guaranteed!

grekko's picture

...and then MYRA steps in!  -I'm here from the government and I'm here to help you.


Run for the hills, as fast as you can!

besnook's picture

there are a few people who are working on the assumption that it will be impossible for pay for baby boomer retirement. some of their solutions have or will include a discussion on capping life expectancy, warehousing people, making people work intil they die(a return to the old, pre ss, model). in any case baby boomers will suffer.

Accounting101's picture

Oh, so if these pension systems just hedge in gold, its all good??? One man's ponzi is another man's road to Eden.

TheReplacement's picture

Since you didn't read the article, it quotes from report that state that pensions assume growth rates that are too high and expenses that are too low.  Investing at regular intervals in gold would protect from market swings and preserve wealth at a pretty stable but upward rate.  Instead it seems that they have not really hedged at all.  All the eggs in one basket.

Do you understand?

q99x2's picture

I don't have a pension. I have gold and Bitcoin.

grekko's picture

Sorry you can't hold bitcoin in your hands.  THe gold will survive, best hedge against electronic and paper assets.

NEOSERF's picture

Never fear, Calpers is working with the NSA on a "no trading loss day every year" algo that front runs all other GS and JPM front-running algos...

ILikeBoats's picture

Look at what happened in USSR... people still got the full ruble amount of what they were promised.  Problem is/was, that the rubles were worth far, far less than they used to be.

NotApplicable's picture

The same is true in the US as well. Pick out any long-term retiree and ask them to compare their purchasing power against the day they quit the rat race.

It's just as Greenspin stated all those years ago, "We can guarantee our ability to meet all liabilities, however we cannot guarantee their purchasing power."

cynicalskeptic's picture

Why do you think that Fed POLICY is pursuit of inflation - though they grossly understate their 'goal' and lie like mad about the actual rate of inflation.

But ultimately the choice is default or massive inflation.   They don't want to default but the long term consequences of inflation are far worse for most.  Government gets to pay off its debt with inflated money and gets to meet its obligations but the buying power of the money they issue is almost nil.  Your savings become worthless and fixed income payments buy nothing.  Wages never keep up with the rate of inflation though taxes sure seem to do so.



laboratorymike's picture

So in other words, they get to default but pretend they didn't. And tax you more than the published tax rate and say that they didn't.

RafterManFMJ's picture

Don't see the problem; they were promised X and got paid X. If you believe the long con, it's really your fault.

Now let's get out there and bring some more fleedom to the world!

Colonel Klink's picture

Yep, Murika, we're gonna free the fuck outta teh wurld!

yellowlight4570's picture

Paper gold in a pension fund. Great idea, no way

that couldn't work......Right!

lasvegaspersona's picture

A gold derivative has the same couterparty risk that any paper has. Only physical, in your hand is good.

kurt's picture

Geezer Army of the Americas

We got the skills, experience, and nothing to lose.

Bring it bitch. You steal our shit and your shit goes down the bloody drain, literally.

Don't you dare overstep.

TheReplacement's picture

Your shit?  You put money in the market.  And... it's gone.  Too bad.  Past performance will not guarantee future results.

astoriajoe's picture

I was having a discussion the other day with a friend who works for the NYC dept. of education.

He was telling me about the 7% guaranteed return he will get from one of the financial products offered to school system employees.

I asked him, what are they investing in that they can get 7%?

He told me that I didn't understand, "its contractually guaranteed".

I sat for a minute and asked again, what instrument can they invest in that will get 7%?

Well, he acknowledged, that's its just like social security, as long as they have new teachers coming into the system, it will continue to pay out.

so its a ponzi system, I said.

Well, as much as social security is, he replied.

I was pretty happy that he acknowledged that.  I pointed out the example of Detroit.

but NYC is not detroit he said...

(I'm happy with small steps)

RafterManFMJ's picture

a friend who works for the NYC dept. of education.

LoL he works. Pull the other one! Look forward to putting the boots to his cardboard and tin shack some rainy night.

centerline's picture

A few years ago this sort of discussion had people here on ZH up in arms.  Guess those folks have come around to reality that they had been lied to.  Only a narrow band of people were born at just the right time in this ponzi scheme.

dark_matter's picture

" Only a narrow band of people were born at just the right time in this ponzi scheme."

Yes, those at the top, AKA the greatest generation. They were young during the depression and made sure that it would never happened again ... to them.

Soul Glow's picture

But that it would happen to their grandchildren.  That's looking out for ya.

NotApplicable's picture

My "Ward and June Cleaver" inlaws would fall over dead if they were ever to face up to their evil culpability in regards to their life-long voting habits and purchases of Treasurys.

They likely wouldn't even survive any attempt at explaining it to them.

TheReplacement's picture

You owe it to yourself to try to explain it.  Keep at it until they understand or die.

ebworthen's picture

Detroit on a national scale.

"Promises, promises...why do I believe....all of your promises?"

Get someone to work for 30-40 years with the promise of a pension then take it away when they are too old to fight.

Welcome to Amurika!  Land of the Debt Serfs!

Now get back to work.

FredFlintstone's picture

40 years? Not public pensioners.

Jumbotron's picture

Naked Eyes.....just another 1 hit wonder of the 80's.....but nice song.

Promises, Promises

nuclearsquid's picture

Am i the only one that thinks that this won't be the first turd to hit the fan?