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There are two certainties in life – death and taxes to which most older people would add the payment of their pension. But not if you live in Prichard Alabama. In the words of the New York Times (full article here)
This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009.
Right on schedule, its fund ran dry.
Last week, retirees asked the City Council for some help before Christmas. Then Prichard did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.
Since then, Nettie Banks, 68, a retired Prichard police and fire dispatcher, has filed for bankruptcy. Alfred Arnold, a 66-year-old retired fire captain, has gone back to work as a shopping mall security guard to try to keep his house. Eddie Ragland, 59, a retired police captain, accepted help from colleagues, bake sales and collection jars after he was shot by a robber.
This is shocking stuff, made worse by the failure of the Alabama Judiciary to take steps to turn things round. The Linked-in Group “Pensions and Investments” (recommended) ran a thread on the issue. I suggested that this incident brought shame on Alabama and the USA. One commentator responded.
the judicial system does not tolerate this. The attorney general of the state of Alabama should have interceded on behalf of the pensioners. The fact that public officials fail to do their duty sometimes is a problem I know is not unique to America.
Does he means us?
Since the Maxwell Scandal in the 90’s, the UK has gone a long way to clean up its act on Pensions. The Government introduced a pro-tem measure, the Financial Assistance Scheme which was replaced by the very excellent Pension Protection Fund. The regulation of occupational pensions now rests with The Pension Regulator, a body that does a good job in ensuring that Schemes stay solvent. Meanwhile the FSA are introducing new rules governing the marketing of DC pensions via the Retail Distribution Review. We have a judiciary that protects pensioners as witnessed by recent judgements against Nortel and Lehmann Brothers (both North American Companies).
While there is still much to do, more and more Defined Benefit Plans have adjusted their investment strategies to ensure liabilities are met. The costs of DC pensions are falling and though we have yet to tackle the central problem of annuities, we have retained a “pensions culture” where pensions are guaranteed till death.
Like many others, I will be working in an industry that is working to increase the efficiency of pension fund accumulation. We should be proud of our pension system and I for one go into 2011 believing that America and other nations can look to the UK for leadership in this field.
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I was not specifically referring to the UK or any country. In general, all over the world, public officials fail to do their duty on a regular basis.
Larry, thanks for the clarification.
My general point is tht pension needs strong regulation. We cannot rely on hope.
As an example, take this statment from CI traders .
“The Company has now closed its three defined benefit pension schemes as regards all active members and ceased to make further contributions to such schemes in
January 2006. The Board, having had regard to all information available to it at this time, is of the view that the closed pension schemes are adequately funded
to meet existing and deferred pension obligations”.
CI traders run pensions on Jersey and Guernsey but are not Regulated by the UK authorities. I hope that the confidence of the Directors then proves correct!
It is hard to imagine that such a statement would have been tolerated by our Pension Regulator.
Pension funding being a complicated subject, the need for strong regulation of both corporate and muncipal sponsors is paramount,
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