Just like politician used those funds as piggy banks for various project. That’s the problem. It’s the risk factor for people to misuse those funds. When you have a big pot of money over there that isn’t needed for 20 years into the future it’s very tempting to borrow from it especially when you won’t be on the hook when it goes bust.
Retention might in an issue in some areas of the city work force but clearly a defined benefit pension (the police still have one) isn’t solving the problem is it. If that was the solution then we wouldn’t be having retention issues.
The problem is that if you saved 10% of you income over the past 30 years and invested it safely i.e. treasuries and then relied on income from an annuity you would have nothing close to the defined benefit that public sector employees currently receive. People love defined benefit contribution plans because they are too good to be true.[/quote]
Agree with your first paragraph. And most public pension funds cannot be accessed by politicians. Of course, you can have problems with these funds, like when politicians used the money that *should have been going toward pension fund contributions* for other purposes…based on what they were told by the “financial experts” from Wall Street and their lackeys who worked for the public pension funds.
Retention is still an issue here because the total compensation package is poor compared to other agencies. Without DB pensions, it would be far worse.
The employees pay around 9% of their income toward their pensions, and the employer covers another part that is determined periodically by actuaries (usually updated every 1 to 3 years, depending on the agency and benefit formula offered, along with investment returns, etc.). The majority of the money used for benefit payments comes from investments. I agree that pension funds should be much more conservatively invested, and that contribution amounts and benefit formulas should be adjusted accordingly. Unfortunately, I am not in charge of these decisions.
