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Middle-class pensioners are to lose benefits under Conservative plans to fund social care, Theresa May will announce on Thursday.
The Conservative manifesto will set out plans to begin means-testing winter fuel payments and to charge more people who currently receive free care in their own home.
The money saved from means-testing the annual heating handout, worth up to £300, will be used to help close the £2.8 billion social care funding gap.
The Conservatives will also pass legislation to ensure nobody has to sell their home to pay for their care during their lifetime, and new rules will allow pensioners needing nursing home treatment to keep more of their assets.
H/t reader squodgy:
“This is a classic case of “incrementalism”.
First they tell us it is NOT a proposition.
So we get adjusted to accept the possibility.
Then we get told it might be necessary, but only for the excessively funded.
Sadly that now means all the middle class who are expendable because they aren’t the establishment.
Prepare to have your pension raided.”
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For months, if not years, we’ve warned that conflicted politicians and union bosses pursue a perverse set of goals in their management of pension funds, most of which have nothing to do with the application of sound financial principles. Here’s how we summarized the situation back in the summer (see “An Unsolvable Math Problem: Public Pensions Are Underfunded By As Much As $8 Trillion“):
Defined Benefit Pension Plans are, in many cases, a ponzi scheme. Current assets are used to pay current claims in full in spite of insufficient funding to pay future liabilities… classic Ponzi. But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit. Everyone from government officials to union bosses are incentivized to maintain the status quo…public employees get to sleep better at night thinking they have a “retirement plan,” public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.
Then, just a couple of weeks ago, CalPERS confirmed our fears when they chose to lower their discount rate by only 50bps to 7%, nearly a full point above their 6.2% projected annual returns over the next decade. Even more startling was the open admission from Richard Costigan, chairman of the CalPERS finance committee, that the decision was motivated by the board’s desire to maintain the ponzi, saying: “this is just a start…municipalities and other government agencies need some breathing room before they absorb the impact.”
The government raided the state pension fund. And now what?
When the Rajoy administration took the reins of power at the end of 2011, at the height of Spain’s debt crisis, the country’s Social Security fund had a surplus of over €65 billion, the result of a gradual accumulation of funds since the end of the 1990s. That money was supposed to serve as a nationwide nest egg to help cover the growing needs of Spain’s burgeoning ranks of pensioners. Instead, it has been used by the government to fill some of its own massive fiscal gaps, with the result that now, five years later, the total surplus has shrunk by 75%, to €15 billion.
Things have gotten so bad that in October the Spanish government was forced to admit to the European Commission that by the end of next year the surplus will have become a deficit, of around €2.6 billion. In other words, a fund that took 16 years to build up will have been plundered dry in less than half that time, at an average rate of around €11 billion a year.
For millions of public sector workers in the U.S., state-run pension funds are the only chance left for a comfortable retirement. In the hopes of providing a stable future for their families, an entire generation was duped into putting decades of their earnings into these supposedly ‘risk-free’ investments. Unfortunately, those who have entrusted the government to manage their life savings may end up destitute as a result.
Budgetary shortfalls that have plagued Detroit for years are now spreading to other municipalities. Since 2008, six local governments have been forced to renegotiate their debts in bankruptcy court, with many others on the same trajectory. The scale of the problem has been repeatedly understated by the media, but across the nation, a somber reality is beginning to set in.
This article was originally published at Birch Gold Group
Of all the troubling economic issues in the United States today, the current crisis erupting from mismanaged public pension programs stands out as a uniquely menacing threat to Americans’ financial security. Five major cities have filed bankruptcy over pension woes since 2008, and dozens more are teetering on the brink.
Faced with massive budget shortfalls, a rapidly increasing number of beneficiaries, and stagnant rates of return, federal and state pension funds around the country are near their tipping point.
Ex-Federal Reserve advisor Danielle DiMartino Booth warns:
It’s safe to say this pension fund will never make it, for numerous reasons. Benefit haircuts are coming.For some reason, Fort Wort escaped the scrutiny of Dallas. I suspect that will change soon.
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The Dallas Police and Fire Pension plan is severely underfunded. Not even a $1.1 billion taxpayer bailout the plan officials request will make the plan whole.
Discussion of a possible freeze in lump sum payments led to a run on withdrawals. The board still has not suspended lump sum payouts.
For the tiny little town of Loyalton, California, with a population of only 700, a failure of city council members to understand the difference between the calculation a regular everyday pension liability and a “termination liability” has left 4 residents at risk of losing their pensions from Calpers. According to the New York Times, the town of Loyalton decided to drop out of Calpers back in 2012 in order to save some money but what they got instead was a $1.6mm bill which was more than their annual budget.
For those who aren’t familiar with pension accounting, we can shed some light on the issue faced by Loyalton. There are two different ways to calculate the present value of pension liabilities. One methodology applies to “solvent”, fully-functioning pension funds (we call this the “Ponzi Methodology”) and the other applies to pensions that are being terminated (we call this one “Reality”).
Familiar scenes returned to Athens today, when Greek police fired teargas at a demonstration of pensioners protesting over cutbacks to their benefits, part of an austerity drive dictated by the Troika (or was it Quadriga). Between 1,500 and 2,0000 pensioners attempted to march to Prime Minister Alexis Tsipras’s office, however they were blocked when riot police blocked their path, intercepting them with pepper spray and tear gas.
Greek pensioners called on the nation to rise against the government’s harsh austerity policy as they attempted to break through a cordon of police buses and special operations troops barring their way to the prime minister’s residence.
— chill (@chiIIinois) October 2, 2016
As Reuters adds, tensions flared when dozens of pensioners attempted to push over a police bus blocking their way a few hundred meters (yards) from Tsipras’ office.