Showing posts with label pensions. Show all posts
Showing posts with label pensions. Show all posts

Feb 28, 2009

Actuworry: Pension Math

According to Financial News the Pension Crisis is growing in Europe.
Except for Germany, most European countries are in trouble due to the credit crisis and subprime mortgages. On average, funding ratio's are below 100%.

As a lot of pension funds are mature, raising premium levels will not offer any help on the short term. Neither a 'selling stocks strategy' does. As a consequence all pension payments are at risk.

'Primarily' we should have learned from Einstein's Pensions theory:

Nevertheless, as actuaries have to be realistic, Einsteins' Pension Formule is a day after the fair. Let's look at at an other way out of this crisis.

When nothing helps, the only way out seems lowering pension rights and payments. However, this is premature and will most likely cause unnecessary social commotion.

Consider, what would you prefer:
A. $ 10.000 pension with a 100% funding ratio?
B. $ 8.000 pension with a 125% funding ratio?

Actuworry won't help. As actuaries we have to stay cool. The only realistic way out is simply to wait for better times.