At presentations you will see the blue line below.
How many times have you seen the red line?
Pension funds unfunded liabilities have indeed been on the rise, especially after 1999. But so have pension funds assets. So much, that the ratio between the two has been declining (which is the natural, long-term trend) since 2008.
In fact, for the whole period between WW2 and 1984, unfunded liabilities were always bigger than funded liabilities. In 1999, unfunded liabilities hit an all time low of 25% of funded liabilities and even though that ratio has risen since then to 75%, it is still much closer to the bottom of the whole period since 1945.
So, is there a pension fund crisis?
Maybe, but it is not obvious to me that it is anything bigger than at any other point in history before the 1990s.
Could there be a pension fund crisis?
Of course. But you know what is going to happen (as long as the US is fully sovereign), the Treasury will bail out the pension fund industry just as it bailed out the fund management industry in 1988 following the Asian/Russia crisis, and the banking, insurance and auto industry following the 2008 financial crisis.
This, sadly, does not prevent that future pensioners might be exposed to some misguided government attempts to respond to this supposed pension fund crisis by extending the retirement age.
Bottom line is that 1) pension funds unfunded liabilities are not even close to being in a crisis and 2) any fully sovereign government is in a position to provide all the necessary resources to secure comfortable retirement to its people.
We have advanced as a society to such an extent that the only hurdle to a normal life to all at the moment is our antiquated rules of accounting, not our lack of resources.
*Betteridge’s law of headlines: “Any headline that ends with a question mark can be answered by the word no.”