How convenient for governments carrying out austerity measures that there happens to be a pot of gold lying around.
While 2009 was spent trying to get through the recession, 2010 was spent dealing with the aftermath. Austerity measures quickly became a household term across Europe, and while the phrase didn’t gain ground in the US, individual states made austere decisions of their own.
For pension systems, this has had severe repercussions, as the assets set aside to ensure future pension payments were raided to secure immediate stability.
In some cases, changes to pensions were justified and did not involve actually tapping into existing funds. Greece was forced to reduce pension payments and delay retirements as pension expenditures threatened to reach 24% of GDP by 2050. France had one of the most generous retirement ages in the OECD, and a move to up the minimum retirement age to 62 from 60 was painful, but necessary.
However, we’ve also seen countries like Hungary making moves that are “counterproductive, to say the least”, as Craig Burnett, partner and defined contribution consulting leader for Europe at Mercer, said. (See An Austere State). Hungary is following in Argentina’s footsteps and nationalising its private pension funds. The government plans to nationalise some $14bn in private pension assets to reduce the budget deficit and public debt, though some assets will also be used to pay current government pensions. Surely, Hungarians are glad to know they can opt out, but only if they want to give up a right to a separate state pension.
Ireland’s bail-out package included pilfering up to €10bn from its National Pensions Reserve Fund. That’s nearly 60% of the government’s commitment to contribute €17.5bn towards an €85bn bail out package.
It seems retirement assets have become the go-to funds for governments in need, turning these schemes into sovereign wealth funds. Where’s the pension fund in that?
The registration deadline for the Workplace Savings & Benefits Awards 2019 is today.
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The Pensions Regulator (TPR) has granted Now Pensions a six-week extension for its master trust authorisation application after the 31 March deadline, PP can reveal.