What Ponzi Scheme? Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption

We've frequently argued that public pension funds in the U.S. are nothing more than thinly-veiled ponzi schemes with their ridiculously high return assumptions specifically intended to artificially minimize the present value of future retiree payment obligations and thus also minimize required annual contributions from taxpayers...all while actual, if immediately intangible, underfunded liabilities continue to surge. 

As evidence of that assertion, we present to you the latest public pension analysis from the Center for Retirement Research at Boston College.  As part of their study, Boston College reviewed 170 public pension plans in the U.S. and found that their average 2016 return was an abysmal 0.6% compared to an average assumed return of 7.6%.

Meanwhile, per the chart below, the average return for the past 15 years has also been well below discount rate assumptions, at just 5.95%.

 

All of which, as we stated above, continues to result in surging liabilities and collapsing funding ratios.

 

But, perhaps the most telling sign of the massive ponzi scheme being perpetrated on American retirees is the following chart which shows that net cash flows have become increasingly negative, as a percentage of assets, as annual cash benefit payments continue to exceed cash contributions.

 

Conclusion, you can hide behind high discount rates and a "kick the can down the road" strategy in the short-term...but in the long run actual cash flows matter.

Read the full report here:

Comments

Creepy_Azz_Crackaah (not verified) Rick Cerone Wed, 08/02/2017 - 21:43 Permalink

Good thing the gubmint education system keeps people stupid or they might ask questions about this kind of stuff.They might even wonder if the gubmint will take their retirement savings in order to pay for the HUGE pension promises that they made to retired gubmijnt employees.

In reply to by Rick Cerone

Lumberjack bamawatson Wed, 08/02/2017 - 21:56 Permalink

Video

Gang of black kids viciously beat up white kids minding their own business in Boston a couple days ago. If the tables were turned , the white kids would have been charged by DOJ with a hate crime. Watch video and you decide who should be charged with a hate crime.

Quincy Savages Viciously Beat Defenseless Milton Kids On Marina Bay Pier As They Attempt To Run Away

http://turtleboysports.com/quincy-savages-viciously-beat-defenseless-mi…

In reply to by bamawatson

Manthong Lumberjack Wed, 08/02/2017 - 22:09 Permalink

 
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When this baby blows, it will be a sight to behold.

In reply to by Lumberjack

Mr. Universe Lumberjack Wed, 08/02/2017 - 22:17 Permalink

The fed and their masters have been running this con for ovwer 100 years now. What makes you think they will ever close the casino. They can inflate at will, destroying any debt with a Ctrl-P.  What's a billion dollar shortfall when we can just print moar? In 1912 the average wage was $300 and a house was less than 3 grand. There is no magic they can't do when they use inflation, expand, contract, it's just like breathing to them.

In reply to by Lumberjack

GUS100CORRINA 10mm Wed, 08/02/2017 - 23:07 Permalink

What Ponzi Scheme? Public Pensions Average 0.6% Return In 2016 Despite 7.6% AssumptionMy response: Looking back on this, all these funds has to do is BUY FAANG+M. sell Volatility short and there would NOT be problem. In fact, the Pension funds would all be overfunded.But of course, they are not permitted to employ this kind of strategy because it is too risky?But with the CBs buying the market, there was NO RISK!!!!Truly sad. Now we are all up a creek without a paddle.

In reply to by 10mm

Normalcy Bias Creepy_Azz_Crackaah (not verified) Wed, 08/02/2017 - 22:14 Permalink

This Government? That's easy.They're going to 'nationalize' private retirement accounts like they've been scheming to do since the Clinton Administration.It's just too much wealth for the buggers to keep their greasy hands off of it.It'll be done in the name of the greater good, the children, paying your "fair share," etc.

In reply to by Creepy_Azz_Crackaah (not verified)

neptune-klm Wed, 08/02/2017 - 21:39 Permalink

Why do they have to assume a rate of return? Why can't they just say ROR is dependent on market performance? My 401K certainly doesn't have any promises ROR. Immediately change EVERY pension to 401K's and be done with this madness!

Cognitive Dissonance neptune-klm Wed, 08/02/2017 - 21:51 Permalink

Because it is a 'defined benefit' pension.Since they have 'defined' what the 'benefit' will be in the future, they need to calculate how much they must contribute today and every year until the future arrives. Doing so requires 'assumptions' that are theoretically modified on an ongoing basis.To change the plans now means breaking promises now. Best to break them later on another politicians watch.

In reply to by neptune-klm

ElTerco Wed, 08/02/2017 - 22:07 Permalink

The current trend among entities that still offer Defined Benefit pension plans is to require employee contributions. It started at around 3%, and has been rising. I've seen as high as 8%.

Anteater torabora Wed, 08/02/2017 - 22:30 Permalink

The Feds still pay 1.3% on deferred compensation, where you designate part of your paycheck into the holdback.That's 10x what your savings bank or MM 401k is paying you, and lets Trump and the Kushner twins claim theyare 'working without receiving a salary'. It's a Cheney shell game. You cash out tax-free when you leave office."I'm donating part of my paycheck to the poor veterans!" Trump claimed. Wait, what paycheck, you buffoon!? Even more disgusting, Trump never paid out a cent from his Veterans Charity Fund drive. Right into his pocket.Trump is scum of the Earth, only slightly lesser evil choice than psychopath Rodham. We're fucked with Jared.Jared paid more than any other NYC real estate property for the '666' Fifth address, Luciferian Satanist Central.These covens, NYC to WADC, they worship Bathomet. Moloch. Ba'al. They would spill your child's blood for 5c.

In reply to by torabora

therover Wed, 08/02/2017 - 22:35 Permalink

Pretty fucking amazing considering some states pay hedge funds 200-300  million a year to manage the money. They get that piece of shit return ? In 2016 ?!Scumbags...all of them. 

red1chief Wed, 08/02/2017 - 22:48 Permalink

Why would anyone in their right mind invest in hedge funds? I think someone should peel back the "pay to play" onion in the relationship between these greedy hedge funds and greedy pension fund managers/politicians. Seems pretty obvious why the returns are sub-par.

mabuhay1 Wed, 08/02/2017 - 22:55 Permalink

With most pension funds only being able to invest in high grade, low yield investments, it is no wonder that they earn such a small amount.  That, coupled with their high cost of administration, it is a wonder that they earn anything at all.The only way pension funds can meet their needs is to increase their risk in order to increase their yields, but in many cases that is not a viable option due to their restrictions on what and how they can invest their funds.  Of course, they are also underfunded by a great amount due to over optimistic projections in the past, and overly generous pensions and benefits for retirees.

Dilluminati roddy6667 Thu, 08/03/2017 - 07:05 Permalink

You maintain/manage  a fund's financial illustration not by best case scenarios but by worst case scenarios.  Too many people look at these illustrations from two fallacy scenarios: one the returns that were possible and second the returns that were expected.In genuine truth there is either enough money being deposited and saved or there is not, that simple, there is either financial solvency or there is not, period.  Any of these funds predicated upon some illustration of future growth and not direct contribution are effectively insolvent not as a matter of if, but instead when. 

In reply to by roddy6667

moorewasthebestbond (not verified) Wed, 08/02/2017 - 23:24 Permalink

0.6% for real? When enough white people get tired of seeing their friends, parents, and relatives getting thrown out into the street, the real shooting will begin.

chosen (not verified) Thu, 08/03/2017 - 01:39 Permalink

The pension funds will probably continue to increase contributions by current workers to pay those that are retired.  Meanwhile it will be more difficult for these workers to get pensions, and what pensions they get will be at lower rates.  They are fucked.

what happened Thu, 08/03/2017 - 08:30 Permalink

Read Pension Tsunami online.  Rates of return for pensions are very high this year.  Connecticut had some money in hedgefunds.  I thought this was risky and not recommended.  The government in Connectiuct is run by the union and they will slit every last throat to get their pensions.   THEY ARE UNITED.