Monday, January 03, 2011

Government raids on private pensions

European countries facing massive deficits are starting to look towards people's pension funds for the money they need. Here are some examples of how those countries are taking people's retirement funds to pay for their general purpose government spending.
The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings....

The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. The scheme was also supposed to provide for the pensions of some public sector employees (mainly university staff). However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.

The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit. In this way, the retirement savings intended for the years 2020-2040 will be used earlier, that is in the years 2011-2024, and the government will spend the saved up resources on other purposes.
Of course, this is just stealing from Pierre to pay Paul. The bill will come due soon down the road. What hope is there that there will be funds sitting around to pay back those "liberated" funds?

And we've been doing the same thing all along here in the United States. There is no Social Security trust fund - today's contributions go to pay for today's retirees with the excess going to pay for present-day spending. All the Social Security fund has is a bunch of IOU statements. And where is the money to pay back going to come from?

At least when we control our own retirement funds, we can be the ones to decide if we want to raid our savings to pay for present needs. When the government runs the show, we have no control at all.


Rick Caird said...

I saw that and posted on the CS site:

Most people in the US still cannot conceive of this happening. But, Pelosi talked about it and there were quiet Senate hearings last fall. The idea is the government will seize the IRA and 401K, and promise a Social Security like annuity paying 3%. Of course, like Social Security, they will spend that money and "hope" they can actually pay the annuity when the time comes.

The next time the stock market tanks, be prepared to see calls for the government to "protect" the retirement saving with some kind of Social Security like plan.

ic said...

Heil 2nd Amendment or Heil mein Fuehrer.

pumping-irony said...

Y, I also remember reading about the some gummint "plan" to steal IRA and 401K accounts in return for some "guaranteed" lifetime retirement income. It was likely a trial baloon floated to see what shots would be fired at it, but I would not be surprised to see it resurface once the public becomes widely cognizant of the fact that the Social Security Ponzi scheme is doomed. Yeah, great idea, let's let the gummint manage our retirement fund because they are just so darn good with money, you know.

MarkD said...

I will drain my 401K and remove my money from the country at the first hint this is serious. I'll blow every penny on a vacation to remember before I'll let it be stolen.

I was saving when everybody else was driving new cars and taking fancy vacations. I'm not going to be robbed by my own government.