Pension gamblers

Retirement pensions are funded in two different ways. Either they are paid by ongoing contributions, or contributions are accumulated as capital whose income will pay pensions after retirement. In the first case, the funding comes directly from contributions, and in the second, from rent, interest and dividends. One expresses solidarity between those who are active and those who are retired, the second shows faith in long term investments and fund managers. In both cases pensions are paid with labour’s added value. Income is redistributed, either directly, or as the result of past investments. Pensions are a consented share of domestic product, or they are part of the profits appropriated by capital.

Having pensions depend on rent, interest and dividends - or increasingly on capital gains, aka stock market speculation (1) - means everyone, active and retired, must support the system that produces these forms of income. Everyone is a capitalist, like it or not. It also means that pensioners present and future are the potential victims of fraud, bad financial management, inflation and market disruptions. Their funds can grow or shrink unpredictably, and the final outcome is always a gamble.

Whatever system is in place, pensions are part of the value produced. It can be one where contributions by the active members of society insure the upkeep of their elders (2). Or it can be a long term speculative accumulation of capital providing uncertain results. One relies on and materialises the social cohesion between generations, and validates the commonwealth. The other strengthens the isolation of each individual, left alone and responsible for investment decisions. That the second dominates is just a sign of the times.

1. https://www.truthdig.com/articles/wall-street-is-the-definition-of-a-ponzi-scheme-literally/

2. This also applies to those who are handicapped or out of work.