European nations begin seizing private pensions

reefedjib · Jan 3, 2011

Here is more data for the US crystal ball. Entitlements are unsustainable.

People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends. In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.

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 Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.

A slightly less drastic situation is developing in Poland. The government wants to transfer of 1/3 of future contributions from individual retirement accounts to the state-run social security system. Since this system does not back its liabilities with stocks or even bonds, the money taken away from the savers will go directly to the state treasury and savers will lose about $2.3bn a year. The Polish government is more generous than the Hungarian one, but only because it wants to seize just 1/3 of the future savings and also allows the citizens to keep the money accumulated so far.

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.

It looks like although the governments are able to enforce general participation in pension schemes, they do not seem to be the best guardians of the money accumulated there.

Albert Di Salvo · Jan 3, 2011

reefedjib said:
Here is more data for the US crystal ball. Entitlements are unsustainable.

The Euros are trying to fight gravity. The seizure of private pensions is evidence of their desperation.

American · Jan 4, 2011

Obama thinks we should be more like Europe. :yes:

j-mac · Jan 4, 2011

In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.

The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement — which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies. Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report.

In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations. (pdf)

Republican Leader John Boehner released this statement today in response to this recent move by democrats:

Keep Bureaucrats’ Hands off Americans’ 401(k)s

Obama Administration making plans to take over the 401(k)s to bail out their union backers

these people are dangerous.

j-mac

cpwill · Jan 5, 2011

this is amazing. this isn't taxation; it's theft.

MaggieD · Jan 5, 2011

It looks like although the governments are able to enforce general participation in pension schemes, they do not seem to be the best guardians of the money accumulated there.

Duh.

Actually, offering "lifetime income options for retirement plans" is being run up the flagpole here in the U.S. Our government will do anything to get its hands on more money. Here's the start....Fact Sheet: Lifetime Income Options for Retirement Plans

PeteEU · Jan 5, 2011

reefedjib said:
Here is more data for the US crystal ball. Entitlements are unsustainable.

Some observations here.

First, the US government has been stealing from Social Security for decades.

Secondly the article is hardly consistent to the title. The whole article stinks of a hatchet job.

But saying that lets tackle the countries mentioned.

Hungry, former Soviet block country with an economy heavily linked to that past. Hungary is in a hole like Greece and Ireland, and have already gotten 22 billion Euros in bailout back in 2008 and are still hurting because they have not done their jobs. So they are desperate since the EU and IMF have denied any other loans to the country.

Bulgaria = flat tax nation.. need I say more? They are really hurting with lack of funds. But as the article states, they did not do anything, but only suggested it.

Poland = High unemployment and huge structural issues in the economy. For example, 15+% unemployment and yet high growth..As for the situation.. note the "they want too".. does not mean they will or have.

Ireland = Again, Ireland tried to not get a bailout and did everything it could. But again... The National Pension Reserve Fund is a public fund, not a private pension fund.. so what they did was take money from one public fund to pay off another public situation.. much like the US has been doing for decades with Social Security.

France = I am not even sure what the hell the article is stating since it has nothing to do with the "private pension" system.

So what do we have here... one nation that has taken private pensions as the title says.. and the rest either threatening to do so, not doing so after threatening or taking from one public fund to pay for other public financing.

And the ironic part is, Hungary, Poland and Bulgaria are all nations with a small "entitlement" system especially when compared to Northern Europe and the UK.

PeteEU · Jan 5, 2011

Albert Di Salvo said:
The Euros are trying to fight gravity. The seizure of private pensions is evidence of their desperation.

And yet in the US it is fully legal for companies to take the private pensions of its employees to help the business in a bankrupt situation..

Albert Di Salvo · Jan 5, 2011

PeteEU said:
And yet in the US it is fully legal for companies to take the private pensions of its employees to help the business in a bankrupt situation..

Haha. Your post is hardly an artful expression of the effect of the US Bankruptcy Code. I suspect you don't know about the Pension Benefit Guaranty Corp.

European nations begin seizing private pensions

Trump Grump Whisperer