Public pensions don’t have to be fully funded to be sustainable, paper finds

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Of course not. They just have to have population growth to back them. We all know this. It’s how they started. The funds withdrawn by the initial cohort weren’t their own, it was from the generations that followed. The system is doing exactly the same thing now. Public pensions always have been stealing from the younger generation to fund the current generation. If your population pyramid inverts, you’re royally screwed though.


“Ponzi schemes work as long as we keep getting new marks”


This is already known by most people that have looked into the discussion around this. That conclusion is nothing new and very few public pensions are 100%+ funded. Most people seem to get more concerned when funding becomes less than 80% of the obligations. >Governments “don’t have to pay off their debt like a household does,” said Louise Sheiner, policy director for the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. “They can just keep rolling it over. They’re never going to go out of business and have to pay all at once.” This is a concerning statement though. It’s true governments don’t need to deal with debt like households. However, at least in the US, local governments can’t necessarily just “roll it”. Check out Chicago… they can’t just roll it. They are trying to increase taxes and maybe reduce services. This is even with huge cash injections around COVID. They were asking for a bail out from the federal government before COVID even started. It seemed unlikely to happen and you can see adverse affects from having funding drop too low. Edit: it appears the people in this article want to go with completely “unfunded” that’s dumb, as it removes the returns that one gets from investments, which is a huge benefit in most cases. If not, the contributions would need to go way up or taxes would skyrocket.


it’s easy, they can just raise taxes to pay for it, without any headlines which is what’s happening as we speak, taxpayers are paying for unsustainably high pensions that weren’t funded. to prevent the risk to future taxpayers being unfairly high, the public employer should pay a good chunk of the expected liability into a closed account, that can’t be raided to pay for current spending. there’s nothing sustainable about a final salary pension. if a person starts on £20k, and retires on £50k, under the old final salary schemes which pay out 1/49 of final salary for each year worked and say they work for 30 years, the total cost of the would be 30/49 x £50k x 38 (current annuity rate on the private market) . that comes to £1.16m. in reality, the cost is much higher as most public pensions pay a survivors spouse pension of 50%. so assuming that person spent a few years on £20k, the pension cost per year worked would well over £39k per year, meaning that admin staff was actually costing more like £59k+ per year.


This is idiotic. Public pensions should be fully funded by the generation of taxpayers that enjoyed the benefits/labor of the public employees that earned the pensions. Including benefit increases along the way. Anything else is intergenerational inequity/stealing from younger generations. Fundamentally different than social security’s paygo approach.