# "25 Dirty Secrets about Pensions"



## Brendan Burgess (20 Apr 2018)

A good blog by Eddie Hobbs 

*25 Dirty Secrets About Pensions*

I agree with most of them but these in particular 

3. The State Old Age Pension system has zero assets, just debt and, at the present rate of PRSI contributions, it is a busted flush. The missing money is equivalent to 1.6 times the National Debt at €324bn, that is the projected deficit over the next four decades, so if you are counting on getting twelve grand a year from the State, you better start lighting votive candles, staying real fit or sign the register for the best pension by getting hitched to a well-paid public servant. (see no.6 and no.10 below).

8.National private pension savings is the easiest bank to rob when a country goes burst. Last time out, but cast as a wheeze about recovering tax relief, the State simply helped itself to nearly €3 billion of private capital. In another solvency crisis, if Ireland starts at an elevated national debt and is locked out of markets, to whom do you think they’ll come first to raise cash? Pensions, like Property is immovable wealth, it is right in the cross hairs. Badly insolvent countries fully nationalise their pensions by appropriating private savings in return for dodgy Government IOU paper, that is the pattern.

12. Ask pension investors what their properties, shares, art, gems, cars are worth and you can expect a reply pretty close to market value. Ask them about their pensions swag and expect to see that look, the one when you’re short taken at the side of the road and here comes the damn headlights!


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## Gordon Gekko (21 Apr 2018)

It’s hard to take the man seriously.


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## llgon (21 Apr 2018)

Gordon, can I assume you won't be taking him up on his offer, repeated frequently in the blog:

'If you’d like to chat about your pension or if you were thinking about starting one email me at eddie@eddiehobbs.com'


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## Brendan Burgess (21 Apr 2018)

Gordon Gekko said:


> It’s hard to take the man seriously.



Hi Gordon

Do you disagree with any of the points he makes? 

Brendan


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## Gordon Gekko (21 Apr 2018)

Yes, there is plenty in there that I would challenge, particularly 9 to 14.

I would also like to ask the author about Tony Taylor, Brendan Investments, the city of Detroit, and the optimum asset allocation for a Euromillions winner.


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## cremeegg (21 Apr 2018)

Sorry Gordon, those ad hominem attacks on EH are a distraction. There is enough to object to in the substance of his 25 points, without dragging in your previous experience with the person making them.


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## Duke of Marmalade (21 Apr 2018)

Funding State Pension is an illusion.  Very few countries do this.  The State's assets are the economy and its capacity to pay taxes.  You might try earmarking the motorway system for the OAP or even buying up chunks of Ryanair or Apple but if it transpires that the social economy can't sustain the OAP the young will simply grab the OAP assets.
The bottom line is that OAP and other State services are a cross subsidy, the funding for these takes the form of the State's capital investment program.


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## Nermal (21 Apr 2018)

Duke of Marmalade said:


> if it transpires that the social economy can't sustain the OAP the young will simply grab the OAP assets



I don't think that's the case at all. What happened in the GFC? Taxes were raised, private assets taken, the retirement age increased. Governments will do almost anything before cutting the pension of the already retired. In the next crisis the same levers will be pulled.


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## Duke of Marmalade (21 Apr 2018)

Nermal said:


> I don't think that's the case at all. What happened in the GFC? Taxes were raised, private assets taken, the retirement age increased. Governments will do almost anything before cutting the pension of the already retired. In the next crisis the same levers will be pulled.


Yep, that was the Labour infuence for which they were well thanked  Our OAP had been doubled by Bertie, it definitely should have been reduced in the GFC.

But the point I was making is that funding of the OAP is an illusory book keeping exercise.  The budgetary process in a modern democracy is to balance the amounts of current and capital expenditure to attempt to get optimal economic benefit for society today and in the future.  If funding of the OAP led to greater national savings than the current process it would be sub optimal.


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## joe sod (21 Apr 2018)

Whatever you think about eddie hobbs its a great thought provoking article. So we need a million young productive migrants to make the state and public sector pensions sustainable. Maybe that is why the government is pushing the case for a million more inhabitants by 2040, of course there is no debate on why this should be , its presented as a fait accompli. The wave of eastern european migrants we got in 2004/2008 is a one off we will never get those highly skilled migrants again. Of course bringing in a million migrants is not a sustainable solution anyway as they also get old and sick and must be paid for . Therefore we need to bring in two million in 30 years time, then we get the problems of UK now with an over populated island voting for brexit


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## elacsaplau (21 Apr 2018)

joe sod said:


> Whatever you think about eddie hobbs its a great thought provoking article.



Sorry Joe.

I shouldn't have read it but somehow curiosity won out. What else is a baby-sitter to do on a Saturday night?! I think Gordon's view of the article is, by a distance, more accurate!


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## lledlledlled (22 Apr 2018)

I'm in the process of moving from a deposit savings and equities based approach, towards prioritising mortgage overpayments and pension.
Is it unwise to pump money into a pension pot if many experts are saying such funds will inevitably be raided in the next recession and/or when some govt finally decides to tackle the crisis with the state pension?


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## Brendan Burgess (22 Apr 2018)

joe sod said:


> Whatever you think about eddie hobbs its a great thought provoking article.



That really is the point. 

He raises a lot of valid issues. 

I would disagree with some of the later ones, but it's well worth having the discussion.



Duke of Marmalade said:


> Funding State Pension is an illusion.



This is a point which the Duke has made before and I have not seen it made anywhere else. 

It's well worth teasing out.

Brendan


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## Duke of Marmalade (22 Apr 2018)

Brendan Burgess said:


> This is a point which the Duke has made before and I have not seen it made anywhere else.
> 
> It's well worth teasing out.
> 
> Brendan


Well, as I said, very few countries and no major country formally funds for future pension commitments.  For those in the pensions industry and for many AAM contributors this must seem like an incredible dereliction of duty.  But they are confusing the economy of the individual with the economy of the state.  As to the illusion,  how real was the Pension Reserve Fund?  How intact would the OAP Fund have been if it existed during the GFC?

So let's imagine that we had a €300bn OAP Fund.  If the budgetary management of the economy had otherwise been equal then that would mean that we would have an additional €300bn national debt.  Where would the OAP Fund be invested?  Ryanair, Apple, Renishaw?  Wow, a geared investment that would make Endowment Mortgages look tame.  Maybe invested in Irish sovereign bonds, well that's just a circular illusion.  Maybe it would be invested in national infrastructure - in a sense that is what has happened, setting up an OAP Fund would simply be bookkeeping.

So the conclusion is that those who ask for an OAP Fund of say €300bn mean it in the sense of the individual saving for her pension.  They envisage that we would have saved an additional €300bn from current expenditure over the years and invested it just like in a conventional individual or company pension fund.  But if our economy had been starved of €300bn budgetary spend it would be in a very unhealthy state today.

Finally, the security of the OAP comes from the strength and sustainability of the social economy.  No amount of bookkeeping or funding will maintain the OAP if the social economy has broken down as it very nearly did do in the GFC.


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## joe sod (22 Apr 2018)

Duke of Marmalade said:


> Finally, the security of the OAP is the strength and sustainability of the social economy. No amount of bookkeeping or funding will maintain the OAP if the social economy has broken down as it very nearly did do in the GFC.



the "social economy" as you term it has to be paid for with real money, there seems to be a bigger and bigger proportion of the population not actually working in jobs that generate real money. The "social economy" is only sustainable if it is kept at a  level that people will continue to work in real jobs to sustain it.


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## Duke of Marmalade (22 Apr 2018)

joe sod said:


> the "social economy" as you term it has to be paid for with real money, there seems to be a bigger and bigger proportion of the population not actually working in jobs that generate real money. The "social economy" is only sustainable if it is kept at a  level that people will continue to work in real jobs to sustain it.


Absolutely,  and funding for OAP won't change that fact of socio-economic life one jot.


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## Nermal (23 Apr 2018)

Duke of Marmalade said:


> But if our economy had been starved of €300bn budgetary spend it would be in a very unhealthy state today.



It wouldn't though, a fund could easily have been built up in the run-up to the GFC - we did the opposite, handing out tax cuts and current spending increases, in the end making things much worse.

It would be invested like any SWF belonging to a small country: primarily in foreign assets, so not a mere accounting exercise.

You can call funding the state pension an illusion, but the future promises that the state has made are not illusions, they're very real and and at present it seems extremely likely that they can't be met.


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## Duke of Marmalade (23 Apr 2018)

Nermal said:


> It wouldn't though, a fund could easily have been built up in the run-up to the GFC - we did the opposite, handing out tax cuts and current spending increases, in the end making things much worse.
> 
> It would be invested like any SWF belonging to a small country: primarily in foreign assets, so not a mere accounting exercise.
> 
> You can call funding the state pension an illusion, but the future promises that the state has made are not illusions, they're very real and and at present it seems extremely likely that they can't be met.


You may be right but that will be because the social economy can't afford it.  No amount of funding will secure the OAP.  If the social economy can't afford handsome OAP the active population will simply grab the fund as they did with the Pension Reserve Fund.


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