GM, Nortel...Public Pensions?

At an event last night, somebody remarked to me that he would not be confident as a participant in a public pension; this from an individual who earlier confessed that in the past he was envious of friends who were teachers and their pension plans.

At issue is a lack of confidence in the entire retirement system and the individuals running pension assets. Also at issue is the lack of knowledge of risk on an integrated basis: risk which includes both assets and liabilities. Finally, with respect to public plans, at issue is the ability to beat an inflation-tied liability.

Is my friend's fear justified?

Partial Solution to the Pension Crisis

Recent headlines include CPP cutting benefits for those retiring before age 65, while BP is closing their defined benefit plan to new employees due to adverse results arising from (among other obvious issues) increased life expectancy.

I have held to the notion for a long time that the only way my peers and I will ever see benefits from CPP is if the retirement age is raised. It is only after reading about BP's situation that I realize this is a necessary fix for all DB plans. Some other side benefits incude:

• allowing defined contribution participants extra years to make up for recent poor performance
• demographically, it keeps more participants in the work force which will reduce the strain we will find ourselves in as baby boomers retire
• for US participants, reduced health care costs as active members of the work force are less likely to complain of ill health
• adjust to the new realities of longer life span
  

The solution must be implemented gradually, but to me it is obvious that beginning in 2010 the entire world should begin a 5 year campaign of raising the legal retirement age to 70. Anyway, when was the last time you saw an ad for "Freedom 55"?

GM Pension

Who else out there is concerned about the precedent the GM pension bailout creates?

If you were a member of a company on the verge of bankruptcy with an underfunded plan, what would you think?