Who Stole My Pension?

 “Who Stole My Pension? How You Can Stop the Looting” – is the title of a book by Robert Kiyosaki and Edward Siedle. It provides an action plan for pension stakeholders, including taxpayers, workers and retirees seeking to enhance pension protection. 

State and local government pensions in the United States hold almost $4 trillion in assets and provide retirement benefits for roughly 21 million current and former state and local employees. These are teachers, fire-fighters, and police officers who serve their communities. 

Source: https://www.thestar.com.my

Workers in government pensions around the world can count on politicians and taxpayers running to legislatures and courts to cut benefits workers have been “promised” when these already struggling government pensions start to run out of money. 

To fix or protect pensions, it is critical to understand how they work and why pensions fail.

Fortunately, the fundamentals of pensions are easy to understand.

There are three components to the health of a pension:

1.   Money In: How much money goes into the pension “pot” (contributions);

2.   Money Invested: How the money in the pot is managed or invested over, say, a worker’s 30-years of employment; and

3.   Money Out: How much money is paid out of the pot (benefits).

If any one of the above three drivers of pension health is amiss, then the pension may falter or fail.

Likewise, simply put, there are three ways to fix a failing pension.

1.   Put more money in the pot;

2.   Invest the money in the pot better; or

3.   Pay less out of the pot.

If the money in the pot is prudently managed, the pension would not fail. That is, enough money had been put into the pot to pay out all the benefits promised—had the money been managed properly. Management of pension investments globally today can most aptly be described as “gross malpractice generally practiced.”

Other disturbing “pension realities” discussed in the book include:

• The people watching over pensions (boards of directors/trustees) almost universally lack investment experience;

• Pensions are becoming increasingly less transparent;

• Pensions are gambling on high-cost, high-risk investments more than ever;

• Pensions routinely lie about the investment fees they pay, their investment performance and funding levels.

• Pensions, particularly those for state and local government workers, are not adequately protected under law or by law enforcement;

• Many pensions are not fully audited by independent accounting firms.  

Now maybe the time for immediate action to stop the “looting” and protect pensions by ensuring promises made are kept. An internet crowd-funded forensic investigation will provide a second opinion for pensioners, so argue both authors. Doing nothing is not an option.

Reference:

Who stole my pension? Book provides action plan to stop pension looting, Edward Siedle,

20 January 2020, www.forbes.com