The financial crisis and pensions.

[Jotty]

I know that there are quite a few money experts on this Forum, so I would like to pick their brains.

Obviously the current crisis in banking and finance is bad news for people with savings/investments/private pension schemes etc.

Is it also a threat to those who rely on local government/OAP pensions?  That is,  could we see a day when the state cannot pay these out from lack of cash?

Normally I would have said no without hesitation, but given the scale of the crisis and the depth of the panic I am beginning to wonder....

[AnOther]

Who can tell.

Frankly I don't think anything can be categorically dismissed, worrying times for those on fixed pensions.

[breizh]

No worries for you. Sovereign backed pensions are 100% "safe", public sector borrowing or taxes will fund future payments. The reason I put "safe" in inverted commas is the possibility of inflation, or worse still, deflation as the European economies charge merrily deeper into recession. This will erode the value of pensions compared to today's levels.. Being cynical, it is the only means that future governments, particularly in Europe, will be able avoid the crippling social payments they have promised their citizans. by effectively destroying the monetary value of the promises. On the positive side, you're safe, this will be my generation's problem, when I retire in 30 years!

 

 

[Jotty]

I think I understand.

I have seen something similar in Eastern Europe, where the pensions in former Communist countries have been honoured, but the present- day value of the currency is very low.