The Global Demise of Pension Plans


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    No easy answers for the pension plans

    … cut monthly pensions benefits
    … increase monthly premiums
    … invest in risky assets
    … increase the age that they can get the pension benefits
    … decrease the number of years that they will get the benefits
    … eliminate the number of people getting pension benefits.

    Alexander Ac

    I have a solution – have *more* children. See, in China it is working… 🙂


    This topic is very important to me b/c I plan to retire within a year. Obviously, I want to chose the best retirement option….monthly pension or lump sum payout. I even asked the author of this article for advice…of course I know he can’t provide financial advice….worth a shot anyway.

    Something Nicole said during one of her presentations keeps reverberating through my brain: She said that once retirees understand these large pension funds like CALPERS are under-funded and the retirees all begin to take the lump-sum option….then the pension fund managers will have to bar the door. I think the message is get out while you still can…..Paul


    Long-term life insurance faces similar problems. Pensions and other security blanket “investments” will be pillars of default and saved capital destruction. Their failed promises will be catalysts for active social unrest. It is critical at this stage of the implosion to wrest any saved after-tax capital from the hands of “trustees” who can legally steal from you (think MF Global) or the banking system (think hyperhypothecation of your assets held in “street” name or crony-capital banks that have legally inserted their derivative European debt assets ahead of your savings in the FDIC pecking order) or the US Government, which will eventually in the name of national security/ protection of its future taxes, force you legally to invest your savings in undesirable debt instruments that no one else will buy. Live frugally, get liquid, get tangible and do your best to have some social and capital firepower if you are lucky enough to come out on the other side. Opportunities for proactive structuring are fading away rapidly.


    As someone who had hoped to retire in 10-15 years, and on the New York Public Employees pension fund, I have never really expected that it still will be there then, or that Social Security will be there, either. However, reading this (, I have to say, what difference does any of this make?

    I had rather hoped to see the hurricane hit Tampa and blow the RNC and all its foul excretions into the ocean – if anyone needed any further proof that Republicans are insane, the fact that they planned their big event in FLORIDA in AUGUST should settle any doubt. But even the prospect of a Romney-Ryan dictatorship is put in perspective by that Arctic News analysis.

    So frankly, I think I’ll spend my remaining time smelling the flowers, as long as they last.


    buddha – it’s all going to let go with a bang – you’re standing next to a lifeboat on the Titanic. It’s small, it’s chilly, but you will survive … if you get clear of the suction of the sinking vessel.


    **Canada, which faces similar problems (“massive shortfalls”), despite an ostensibly far better performing economy (how on earth does that add up?)**

    When I talk with Canadians there is almost a blushing when they remark how “resilient” their economy is in todays world. They seem to not realize their personal debt is increasing at record levels and there are articles out of Canada written about the “Alarming Canadian debt levels”. It really shouldn’t take a genius to figure out Canada is in a “credit bubble”. But I will let you in on a little secret, maybe even a joke being played on Americans(again): Canadians have been opening up credit cards at U.S. retailers like Home Depot, Lowes, JC Penneys, Macy’s, Kohls and anywhere they are welcomed to do it. Canada can only measure debt in Canada but the aggregate debt is mind blowing. Now when the defaults start coming who is going to eat the bad Canadian debt in the U.S.??? LOLOLOLOL who else – the taxpayers!!! Again the patsy taxpayer will cough up the losses (billions) as retailers count their profits. America found a new way to increase it’s “consumer eCONomy” as it’s denizens are down for the count!!!
    See all the cranes in Toronto???? good luck with that bubble too!


    10-15 years? does that mean that we have that long before the crash….I don’t see how pensions go more than five years.

    Viscount St. Albans

    Ilargi said…..
    We have been saying for a long time that anyone in the western world who’s 10-15 years away from collecting their first pension payments, shouldn’t expect to get much, if anything, when the time comes.

    @Ilargi and others….

    A question about pension vaporization: 10-15 years ???

    A decade strikes me as a particularly mellow time frame for the impacts of what you’ve been describing previously. I would have thought, from previous writing, that pensions would be effectively gone in a much shorter time than 10-15 years?

    I would have imagined you’d say with 2-3 years….Or 5 years max. Is this 10-15 years a typo?


    Nice article. It links in pretty well with the debt article you posted previously. That’s because pension funds hold a great deal of debt. So debt (sovereign and otherwise) and what happens to it is very closely linked to the viability of pension funds.

    Low bond rates = lowered pension fund viability.
    Sovereign defaults/debt jubilee = destroyed pension fund capital.


    Sorry guys, but we simply don’t have the same obsession with exact timing that some of you do. I don’t find it all that important whether it’s 10 to 12 or 5 to 12. What I find important is that the clock is ticking.

    10-15 years is just me staying on the safe side of things. And besides, people are 5 years older than they were when we first started warning about this issue.

    Not every pension plan will go down in the same way and at the same time. Some are huge, for one thing, and there is no clear pathway for depleting them, so chaos and diversity is ensured.


    Still, yes, even if your pension is just 5 years away instead of 10-15, you need to be seriously worried about it. But since just about everything we write and have written over time makes that clear, it doesn’t need to be repeated every single day.

    Viscount St. Albans

    Jim is 60 years old. Jim goes to the doctor for a checkup.

    Doctor: Jim, I’m sorry, but I’ve got some bad news.

    Jim: What is it Doc?

    Doctor: Jim, you’re going to die.

    Jim: What ? When ???

    Doctor: 5, 10, maybe 15 years. Stop obsessing about the timing.

    Jim: Thanks Doc.


    Viscount St. Albans post=4982 wrote: Jim is 60 years old. Jim goes to the doctor for a checkup.

    Doctor: Jim, I’m sorry, but I’ve got some bad news.

    Jim: What is it Doc?

    Doctor: Jim, you’re going to die.

    Jim: What ? When ???

    Doctor: 5, 10, maybe 15 years. Stop obsessing about the timing.

    Jim: Thanks Doc.

    Doctor: In six months, You will forget everything I told you because you have dementia.


    Brian post=4971 wrote: As someone who had hoped to retire in 10-15 years, and on the New York Public Employees pension fund, I have never really expected that it still will be there then, or that Social Security will be there, either. However, reading this (, I have to say, what difference does any of this make?

    The abstract on that article seems scary enough, but I have no idea what to make of all the technical data analysis. Anyone here well-versed in this kind of stuff?

    Malcolm Light wrote: Abstract

    Although the sudden high rate Arctic methane increase at Svalbard in late 2010 data set applies to only a short time interval, similar sudden methane concentration peaks also occur at Barrow point and the effects of a major methane build-up has been observed using all the major scientific observation systems. Giant fountains/torches/plumes of methane entering the atmosphere up to 1 km across have been seen on the East Siberian Shelf. This methane eruption data is so consistent and aerially extensive that when combined with methane gas warming potentials, Permian extinction event temperatures and methane lifetime data it paints a frightening picture of the beginning of the now uncontrollable global warming induced destabilization of the subsea Arctic methane hydrates on the shelf and slope which started in late 2010. This process of methane release will accelerate exponentially, release huge quantities of methane into the atmosphere and lead to the demise of all life on earth before the middle of this century.

    Viscount St. Albans

    Which one is not like the others?

    A. Splish-splashing in your fancy new kayak with neon racing paddles at the top of Niagra Falls.

    B. Pissing into the wind from the end of the harbor pier as a Category 5 spirals relentlessly closer.

    C. Reclining in your Lazy-Boy as the mailman drops off the monthly pension check for the next 5 years, most-likely, and perhaps the next 10 to 15 years as well. You never know for sure.
    Perhaps I’m alone in my interpretation of TAE’s underlying tone. But Yo-Yo barely begins to describe it.

    Does Stoneleigh agree with this post about pensions?
    What about Ash?
    I’d imagine the answer is no. They don’t agree. But it’s easy enough to clarify. Can’t somebody ask them?


    The question of when a pension fund will (essentially) default is a really tough one to answer. Its similar to asking when a nation will experience a sovereign default, or leave the eurozone, or experience a bond auction failure. Near term, it is driven by the performance of the assets (debt & equities) within the fund. Longer term, its the economic performance of the entity providing the pension (i.e. car sales & profitability at GM, the State of Illinois sales & income tax collections, etc).

    Another aspect is, is this a “core system” pension or is it peripheral? If its provided by the US DOD, odds are its the last thing to go. (Funny, the establishment always manages to pay the Army). If on the other hand its the State of Illinois…man, lump sum looks good.

    You can get an early warning by asking your fund what’s inside it, and then infrequently monitoring the performance of those assets. They will likely delay informing you about returns, so if you monitor it yourself, you’ll have perhaps a one-year jump on the rest of the herd. Longer term, simply realizing that every time you hear bad news about the State of Illinois, you know that your pension situation is getting more precarious.

    In some sense, its a big game of Who Moved My Cheese. You have to keep alert, sniff The Cheese frequently, and be quite clear that the fundamentals driving pension inputs and outflows will eventually affect you regardless of what the current law says. Everything will be fine right up until suddenly, they’re not fine anymore.

    If you have something you could be doing with the lump sum that would dramatically lower your living costs or cost-effectively making your life more resilient, you might consider doing that. For instance, paying off credit card debt, or even home mortgage debt are possibly reasonable uses for part of your lump sum. Paying off a mortgage currently at a 5% APR effectively gives you a tax-free and risk-free ROI of 5%, which is awfully hard to find these days, and likely better than a pension fund manager will do. Depends on the size of the house and where it’s located, of course. Mom bought some solar panels for a price that effectively gave her power for 10 cents per kwh assuming a 10 year breakeven. Every kw generated after 10 years is free. So protection from power inflation costs, AND free power starting at year 10 up until the panels die.

    Some might argue that things will totally collapse and so you shouldn’t pay off anything, and instead take it out as cash and hide it under the mattress. Certainly if there is a deflationary crash and home prices drop by 75%, you can walk away from your existing mortgage, and buy another house with that cash for 1/4 the price. Heck, if you assess that as the “likely scenario”, sell your current house now, take out the lump sum, put the cash in a box, rent and wait for the Earth-Shattering Kaboom!

    Ultimately, you have to judge for yourself who will be a better steward of the money – you, or the pension fund manager. And that depends on who provides the pension, how many reasonable choices you see for your lump sum, and what you assess as the likely outcomes of our current predicament 5-10 years down the line.

    While making choices yourself might be risky, delegation of choice to a pension fund manager (who has very limited choices, all of them tightly coupled with the current financial system) comes with risk also.


    Sent an email to the Automatic Earth crew hoping they could provide some advice around the topic of the demise of pensions, but figured I’d field those questions here in the comments section in hopes of getting a response…

    1) At what point does it make sense to “cash out” and actually quit your job to protect (well, access – at least here in Ontario where you can take a payout of something in the neighbourhood of 50% of your pension funds, though taxed of course) your pension?

    2) What kind of arguments would you use with loved ones to convince them their pensions are at risk? Logic doesn’t seem to win most people over in my experience; emotion on the other hand…

    3) And while this is a bit off-topic, does anyone have any opinion on using the vaulting services of security companies as a way to protect their wealth? Besides cash on hand, stocking up on hard goods & food supplies, and Treasury Direct I’m at a loss for places to try to hide my wealth for the coming storm.



    @Variable81 – It is a big dilemna. What makes sense for 1 person may not be so good for another. And no matter what you decide, it is nearly impossible to discuss it with others who have not yet awakened. Also, try reading thru comments on this thread for additional info…

    Mark T

    I sense a pattern.

    The system can’t support a demand. More people are going to try to retire than any time in history of the current social system. The math doesn’t add up – simply put production will not supply demand with mass reductions to the work force. More people will be retired than the work force can support.

    Politicians who need a short term result search for a quick fix. One quick fix is media – keep the talk positive. Another is laws, change the laws to allow fuzzy accounting. Change when you declare losses (losses can be deferred more than a year) and change the terms of return (allow more than a year to try to achieve interest returns that aren’t there).

    Now this will allow calm during the storm. The people in charge are still in a panic they need those returns. In order to achieve a return one must drop legitimate blue chip for high risk returns.

    At this point eager people race to offer their scheme of high risk for investment. Its all a ponzi scheme and the government is in on it. With less labour in the market and higher costs only one possibility is possible the current value of money will decrease one way or another.


    I guess pension plans won’t matter much if that Arctic News piece is likely. That is some scary shit–like an end of the world horror/disaster movie only real.

    I can only make out some of the data, but what I do understand is awesome, not in a good way. Kind of takes the satisfaction out of saying, “I told you so,” don’tcha think?

    It brings me back to William Catton and Overshoot. Meanwhile over at the Big Tent Mitt and Barry duke it out for charity.


    “The best, or even only, advice for those of us who belong to younger generations is: don’t count on getting a pension when you reach retirement age. It’ll probably have been moved to age 85 or over by the time you get there anyway.”

    Since I’m 20, my retirement would then be 65 years into the future, the year 2077. You’ll have to excuse me if I doubt you have any idea about retirement arrangements in such a distant future, given that it’s difficult predicting things only ten years hence.



    Since I’m 20, my retirement would then be 65 years into the future, the year 2077. You’ll have to excuse me if I doubt you have any idea about retirement arrangements in such a distant future, given that it’s difficult predicting things only ten years hence.

    Yes and no.

    I think it’s best to recognize that pension plans as a whole are historical aberrations. They didn’t really exist in the west before, say, the 2nd half of the 20th century, and don’t to this day in most of the world. Your kids and grandkids – if you live long enough – are your retirement plan, mostly. China has close to zero provisions for retirement, which is why savings rates are so much higher there. In many countries in Africa and Asia, the very notion of savings is a mirage.

    I don’t see how for 20-year-olds today there would be any pensions available in 2077. I really do think our present wealth has been a one-off, simply because of the financial crisis, the energy crisis and the climate crisis.

    We live, or have lived, with this idea that we can work today to provide not only for our day to day expenses, but also for our decades into the future ones, and perhaps even our children’s. Try that one flipping burgers.

    You take a step back and it all looks quite convoluted. Not promising.


    Ah yes, I see I’ve been approaching this in a too complicated manner. Forget about distracting spanners in the works such as the historical struggle of the working class movement to secure rights, different socio-economic models, the required labour vis-a-vis the amount of consumption of natural resources, the future and past relations between people, or that there could indeed be a different way of providing for the sustenance of senior citizens beyond their own private savings, and a million of other things. There is but one factor, and that is the hard to define concept of “wealth”. I will now take a step back and calculate exactly how 2077 will be.


    Hi Henrik, you said, “There is but one factor, and that is the hard to define concept of “wealth”.”

    What is so hard about defining ‘wealth’. Wikipedia says, “Wealth is the abundance of valuable resources or material possessions.” Close enough.

    The problem is that there are frequently competing claims against ‘wealth’, especially in times of shortage. You grow corn, and you forward sell half your crop, for expense money. But you get a bad harvest and it is half the normal size. And you are hungry. In theory, none of that corn is yours, even though you grew it and you are starving to death. Competing claims.

    On a larger scale, the USA has forward sold the economic output of the next generation. Maybe we should have asked them (you, lol) if they/you wanted us to forward sell half your output over your lifespan and give it to Iraq, Afghanistan, drug dealers, makers of flat screen t.v.’s, etc.

    So you see, your calculator will be of no use to you in your attempt to determine your retirement situation. It is dependent on political, socio-economic, and moral value questions and answers. Like, ‘should we feed the old farts or kick them to the curb, lol?’………..

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