Pension system handicaps British businesses, study says

The pension time bomb is not going to go away any time soon in any country in the industrialized West. Granted, some pension funds will fare better than others on a relative basis but the truth is that pension money has been spent or lost long ago. Not only that, but in countries of a more socialist inclination like Italy for example, pension contributions have been spent because the government relies on a pay-as-you-go type of arrangement whereby new entrants in the job market pay the pensions of the geezers taking their retirement.

Whichever way you slice it, if I am right and we are in a deflationary recession, whether the pension scheme is a Defined Benefit, a Pay As You Go or anything else of any description, it will not be sufficient to pay what was promised at the outset. That is because in a deflationary environment, stock market returns will be subdued, as will be salaries, as will be the general level of economic activity.

As I never tire to reiterate to anyone that wants to listen, there is nothing particularly wrong with a fiat monetary system or fractional reserve banking or democracy. No system is full proof. However, one of the fiduciary duties of governments should be to mandate the study and the comparison of past social/political/economic cycles so as to monitor the progression of the economy and to moderate things like inflation and the rate of expansion of money supply during given periods of time in order to alleviate the deflationary bust that is enshrined in the inflationary logic.

http://www.guardian.co.uk/money/2009/may/26/pensions-deficit-private-business

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One Response to “Pension system handicaps British businesses, study says”

  1. Mel Kenny Says:

    Agreed. If you look at BT’s most recent results http://news.bbc.co.uk/1/hi/business/8049276.stm the company runs like a pension scheme with telecommunications on the side.

    Defined benefit schemes are crippling private sector businesses where as only the likes of the to be privatised Royal Mail can find itself getting a big helping hand from the pay as you go, unfunded ponzi state aided UK public purse pension scheme.

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