[jdasdf]

>Public pensions and family benefits may seem old-fashioned compared with asset-based solutions. But they provide security without locking households into markets, without generating trillion-dollar investment pools, and without driving asset inflation that prices younger generations out of housing and wealth. Sometimes, the non-assetising path may simply be better.

It's an obvious propaganda post intended to demonize the financial markets, and promote unsustainable social security policies.

[toomuchtodo]

If the options are pensions or self investment, how is one sustainable and the other isn’t? The investment dollars in scope are similar, with pensions being better managed than your average human would do.

[bluGill]

> with pensions being better managed than your average human would do.

Only if they are. Some pensions are well managed. Some are not. Some seem well managed for years, but in fact they are not. Some have been well managed for a long time, but someone incompetent gets in power. Can you tell the difference.

Oh, and if you can tell the difference, can you convince everyone else and thus get this fixed? Or will voters be happy with the mismanagement because it is returning great results now on low investment leaving more money to spend on other things now?

[ryandrake]

I guess the question is: Will the average person 1. choose to save and 2. invest that savings better than the average pension manager?

I know, I know, everyone on HN is an investing genius and consistently beats the S&P 500, but we're talking average joe.

[bluGill]

In the worst case no pension (either personal/private or public) is better than a pension. At least if you have no pension you got to use/spend your money today - it didn't go to whatever the corrupt pension manager did with your money.

Before pension reform in the US I had some distant relative who was laid off 3 months before his planed retirement when the company went bankrupt - it then came out the pension he was counting on was entirely invested in the now worthless company stock. This is the real risk you need to worry about if you have any form of pension.

[SpicyLemonZest]

In principle defined contribution plans should be a good way to split the difference, although I recognize that it's a lot harder politically to make them mandatory than it is for pension contributions.

[bluGill]

The question is who is managing the pension. Defined contributions can be a really bad deal if you can't control who is managing the money.

The other major problem with contribution is you don't know when you will die. If I'm going to die at 65 like some relatives I should retire at 50, but if I'm to live to 97 in great health like others I should wait a few more years. (family history says my expected lifespan is about 80, but it follows a statistical curve ranging between 65 and 95 - just like nearly everyone else in a "first world" country). I want a system that acounts for how long I will live and my health and ensures I have plenty of money - group pensions should be really good at that.

[jdasdf]

Most pensions are Pay as You Go systems where no investment actually occurs (or if it does it is vestigial).

Effectively no different from a regular ponzi scheme being used to purchase votes.

Self-investment has the actual investment there.

If pensions were fully-funded you'd be right, but they aren't in almost every country. Unfunded pension liabilities are well over 300% of GDP in most european countries, but since they don't show up on debt to gdp metrics, people aren't aware of it.

>The investment dollars in scope are similar, with pensions being better managed than your average human would do.

Also that is untrue.

[TheCoelacanth]

Retirement is going to be effectively pay-as-you-go no matter what you do (at least until we invent much more sophisticated robots).

You can't stockpile nurses and save them up for when you retire.

If you save money or invest in financial instruments, you're still relying on labor from subsequent generations and if there aren't enough of them, higher labor costs will eat up everything you saved.

The only way to really save up for retirement on the society-wide scale is to spend money on things that increase the productive capacity of future generations.

[toomuchtodo]

> The only way to really save up for retirement on the society-wide scale is to spend money on things that increase the productive capacity of future generations.

Indeed, and we didn’t do that. We invested in issuing debt and other non production capacity efforts.

[jdasdf]

>You can't stockpile nurses and save them up for when you retire.

But you can?

It's called paying nurses more to encourage greater supply...

[toomuchtodo]

Well, the current situation is equally effectively unfunded because you’ve got gains in an investment account that will be competing for a rapidly shrinking working age population in concert with large amounts of voters who don’t have investments but have a vote to vote for someone who will increase taxes to increase benefits. Pick your illusion of generational contract and financialization performance art.

Pensions are no more a Ponzi scheme than a capital market predicated on growth that will not occur due to structural global demographic dynamics. People are too bought into an abstraction while the underlying crumbles, for obvious reasons.

TLDR Humanity is Pay As You Go no matter what.

https://www.sas.upenn.edu/~jesusfv/Slides_London.pdf

[jdasdf]

>Well, the current situation is equally effectively unfunded because you’ve got gains in an investment account that will be competing for a rapidly shrinking working age population in concert with large amounts of voters who don’t have investments but have a vote to vote for someone who will increase taxes to increase benefits. Pick your illusion of generational contract and financialization performance art.

You seem to have a serious misunderstanding of what the current situation is.

There is no "gains in an investment account" because social security is unfunded, and has only vestigial investments (many of which are primarily fig leaf to finance the government at lower costs/lower returns).

There won't be any "gains in an investment account that will be competing for a rapidly shrinking working age population" because there fundamentally aren't any gains.

Now, assuming that your misconception was correct, and that there was a pot of unrealized gains to be consumed when you retire... That still wouldn't cause any "competing for a rapidly shrinking working age population" because the thing about having resources is that you can spend them to get more of the things you need. Sure a large influx of capital requiring some specific goods or services would increase the price of those things... which would in turn increase the incentive to provide more of those things.

Frankly that isn't an issue if it's fully funded.

> large amounts of voters who don’t have investments but have a vote to vote for someone who will increase taxes to increase benefits.

And this is the problem.

Theft and its normalization through political power is what causes the self-funded and fully funded model to fail, not anything inherent to it.

>Pensions are no more a Ponzi scheme than a capital market predicated on growth that will not occur due to structural global demographic dynamics.

There is nothing to capital markets that requires growth. Indeed historically it is the opposite, and investors tend to overpay for growth resulting in lower returns.