The rational behind pension funds is that it takes expert insight and iron discipline to build up a reliable pension. It is also assumed that most people cannot put aside enough savings for the eventuality that they live longer than average. The pension fund takes on the risk of longevity by averaging out the cost between those who live long and those who live short lives.
However, none of these assumptions are true. It does not take expert knowledge to make prudent investments. As long as we stay clear of debt, save in gold while the Dow/Gold ratio is above 7, and save in stocks when the ratio is below 7, we are practically assured a good return on our savings. If we make it a habit to save regularly, success is pretty much assured.
The idea that we might outlive our savings is largely wrong. It assumes that there is some limit at which we cannot save more. While this is true for those saving cash in a bank account, due to inflation. This is not true for other types of saving. Inflation will typically limit the purchasing power of cash savings to a decade or two, no matter how much we try to save. But gold and shares do not behave this way.
On the other hand, pension funds are limited in the way they save. They have to be invested in stocks and bonds, and are largely prevented from saving in gold. They are regulated by politicians, who take advantage of them by forcing them to save in instruments that benefit the political elite at the expense of the saver.
The investment structure forced upon pension funds requires stable economic growth and above 6% interest rates to work. Neither of these conditions have been present the last 20 years. We have had wild fluctuations in the financial markets, and interest rates have been low. The result of this is that all pension funds are underfunded. They will have to default on their promises at some point. People thinking themselves safe from old age worries based on their pension promises are either ignorant of the current precarious position of pension funds, or deluding themselves.
However, the biggest problem with pension funds is not the fact that they are underfunded. Rather, it is their remoteness from direct access by the saver. They cannot typically be sold, or otherwise converted into ready cash. Also, first in line to the pension fund's savings is the state, not the saver. If the state needs some extra cash, it can easily make a law requiring pension funds to buy some worthless state debt. This is already happening, and the trend appears to be accelerating.
Furthermore, those of us who get in trouble with the taxman are cut off from our savings. I never intended to get in trouble. But faced with a confiscatory tax, I had little choice but to stop paying my taxes. If my savings had been mainly in pension funds, I would have been trapped. The cost of disobedience to the state would have been too high.
Luckily for me, I had little savings in pension funds. Most of it was in an underfunded pension fund in Holland. My future pay out was only going to last me a few weeks every year. Besides, they had stopped recognizing me. Being a foreign national, they were making themselves difficult. They were clearly trying to cut me off. I had little to loose by giving up on my claim entirely.
The irony of this is that if I had been buying gold coins for the money I was forced to put into the pension fund while I was working in Holland, I would have had a great deal more savings to draw on by now. Rather than enriching me and securing me, the pension fund robbed me, and it put me in a precarious situation. Pension funds are no longer an insurance for the future. They are traps that tap into our savings, leaving us all the more exposed and vulnerable by the time we reach old age.
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