12 Oct
  • By Eelco Lodewijks
  • / Blog


This is about the imminent demise of pension funds.  Many pension funds are already actuarially insolvent, and the rest soon will be.  That means your future pension income will be both less than promised, and insufficient to support your lifestyle.  In fact, aside from some state and municipal pension funds, I believe both private and public pension funds are on their way out by, or before, 2030/2035.  The primary reasons are as follows:

  1. Pension funds must maintain a conservative “relatively low risk” portfolio and earn say 7.5% to remain actuarially solvent.  However, they are not able do so in this era of negative interest rates, and understated inflation.  Consequently, they are taking imprudent risks in a search for higher yields, which will prove fatal when equity markets next experience a material correction or crash;
  2. The ratio of contributors to pensioners continues to fall and is now approaching, or below, sustainable levels.  This means there are too few people contributing to the fund.   Consequently, pensioners are increasingly being paid less than promised in retirement and/or being told to retire later;
  3. Thanks to technology, people are living considerably longer than originally projected, which, which means the pension’s funds are being depleted faster than expected.  This too has compelled pension funds to raise the retirement age;
  4. The number of contributors continues to fall.  Technologies like Automation and Robotics have replaced jobs and herald an era where less people are needed to do the same amount of work.  Furthermore, the new jobs are increasingly contracted out, as many people work for more than one company and/or work from home, all of which places them outside the normal company pension schemes;
  5. Technology has heralded an era where the life of companies on the US Stock Markets continues to fall, which suggests they will not be around to provide the security for their in-house pension funds;
  6. Most Governments have promised future pensioners more than they will be able to deliver.  Consequently, the massive unfunded liability embodied in funds like the USA’s social security, that has implicitly been thrust on future generations, will be too large for them to fund, which means benefits will fall far short of expectations. 

Consequently, your pension fund is going to pay you less than promised and certainly less than you expect.   Furthermore, your future income will be eroded by inflation, which is always higher than officials will have you believe.  Accordingly, most pensioners cannot survive on their pensions.  This rapidly deteriorating trend does not bode well for your future pension.

Therefore, with immediate effect, I suggest you urgently contribute to a supplementary investment fund to cover any future shortfall in earnings from your pension fund. 

If the Universal Basic Income that is being proposed in numerous countries like the US, EU and UK is adopted, one must ask if there is any need for a pension fund.  Almost certainly, the answer to that question is “Yes”, because it will almost certainly be inadequate to cover your basic needs, especially in your latter years.

Please comment or ask questions.  We would love to hear from you.

My book Technology Tsunami Alert will be launched mid-2020. 

Please also read the Gold/Silver and Investment chapters on my EelcoGold website.