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Thursday, August 03, 2017

What Ponzi Scheme? Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption

We've frequently argued that public pension funds in the U.S. are nothing more than thinly-veiled ponzi schemes with their ridiculously high return assumptions specifically intended to artificially minimize the present value of future retiree payment obligations and thus also minimize required annual contributions from taxpayers...all while actual, if immediately intangible, underfunded liabilities continue to surge.

As evidence of that assertion, we present to you the latest public pension analysis from the Center for Retirement Research at Boston College. As part of their study, Boston College reviewed 170 public pension plans in the U.S. and found that their average 2016 return was an abysmal 0.6% compared to an average assumed return of 7.6%.
Meanwhile, per the chart below, the average return for the past 15 years has also been well below discount rate assumptions, at just 5.95%.



Steve said...

Well, back in 1972 when I was starting out, savings interest was 6.6 %, Investing in a Union retirement for 40 years sounded great, but with varying and dropping rates back then, I opted out and went Non-Union, after all, why give up 6% of a paycheck or more for an equal or less return?

Thanks, Steve, for being smart back then!

Anonymous said...

Leave it to the GAO to screw it up. They use an artificial actuary expected rate of return but tell pension plans they must fund their pensions based on the GAAT rate (which is much lower, meaning companies have to put more money in for future pensioners).
This is the one reason so many businesses stopped offering pensions.
I just wish public pensions were held to the same standards.
Seems like a common theme these days- governments giving themselves a break while making rules the rest of us need to follow.

Jim said...

Maryland still way underfunded (see the chart).

Contributions stolen by Democrat lawmakers to fund other projects.

They are able to do that because the voters keep re-electing them.

When is the stolen funding going to be replaced, Governor?