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this post was submitted on 21 Dec 2024
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I think it actually fits quite well.
Meanwhile, the current pension system in most countries depend on a growing population to spread out the payments for pensioners over multiple workers.
Ponzi schemes collapse when there aren't enough investors to sustain the dividends to be paid to the existing investors. Most countries' pensions rely on an increasing amount of working age inhabitants to pay retirees and are now having issues paying out pensions due to the shift in demographics, that's why many countries have been increasing the retirement age recently.
There are 2 solutions to this.
This is a fundamental misunderstanding of how these funds work.
The goal is not to pay people with the money from new people paying into the pot. They invest the money and then the pot grows and that money is used to pay out. When the pot is not growing enough - whether because investments aren’t doing well enough, or you designed a you designed an bad system where people can withdraw from it for too long, or any other many possible issues - then yes you functionally end up dipping into the money given by new people, but this is not how it was designed to be used.
You are acting like this is a one-to-one system where you just put money in, then you get money out later, and all of the money given out is 100% the money that people put in in the first place with no intention of growing that money or finding a sustainable way of disseminating it long-term.
Mismanagement/poorly built systems are not the same as Ponzi schemes. Unless you think, I don’t know, US Social Security is also a Ponzi scheme?
This misunderstanding is on your side. There is a method of funding pensions refered to as pay as you go (PAYG).
This is exactly how many unfunded, state sponsored pension schemes function. No pot of money exists. Only the ability to collect taxes.
This is true for private pension schemes run by companies and individual pension schemes. Funded pension schemes are (usually) not ponzis.
State pension plans are primarily funded (in order of what comprises the most) by 1) the government 2) investments and 3) employee contributions.
Pay as you go is about employee contributions, which is typically the smallest pot being contributed. I don’t think you know what you’re talking about.
I don’t think you know what you’re talking about.
The UK State Pension is unfunded, which means that its obligations are not underpinned by an actual fund or funds. Such schemes are often referred to as “Pay As You Go” (PAYG). The pension payments made by the government for unfunded pensions are financed on an ongoing basis from National Insurance contributions and general taxation.
That’s not a fucking Ponzi scheme dude! It’s right there in your own comment!
Early ~~investors~~ pensioners are paid off with money put in by later ones.
Sounds like a ponzi to me.
It can sound like someone’s whistling Dixie if you want to claim that, it doesn’t make it true.
Your misunderstanding of the process and confusion with private pensions doesn't make it false.
PAYG funded State pensions fit the definition of a ponzi. Therefore they are a ponzi. The fact it is government approved and transparent does not negate the fact that current investors are directly paying early investors.
It has two sources of funding (taxes being the second) and there isn’t a middle man skimming a cut while paying older participants simply with new participants’ money while claiming their money is invested to generate money to pay them all out. The entire point of a Ponzi scheme is you are pretending there is money being generated that isn’t, you are just using new victims money for as long as possible until the music stops. They literally make up numbers to cover their tracks. It’s a fraudulent enterprise by design.
It is not a Ponzi scheme. It is literally not a Ponzi scheme by definition. You are making up your own rules and definitions because of how it feels to you. Do I think it is flawed and not a great way of handling these funds if you want them to be steady in the longterm? Absolutely. But it is not a Ponzi scheme.
I’m done man.
Taxes is the same source of funding. Workers.
Er. The government.
Exactly. State Pensions are promised but there is no money held aside for them.
I've already given you the Ponzi literature, and shown that PAYG pensions satisfy the description.
Cos, like your PAYG error, you just can't admit being wrong.
Of course I understand that the money that is put in is invested, but that doesn't mean the problem goes away when the system relies on the "pot" growing at a certain rate.
EDIT:
I'm not implying that it's the same, just that the comparison fits better than you might expect.
In most PAYG state pensions the contributions made by workers are not invested. They are paid directly to pensioners.
When did I ever say the problem goes away? I am saying it is not a Ponzi scheme. You were saying it is a Ponzi scheme. Don’t move the goalposts here.
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