The reason of crusade against pension funds

[NorthYorker]

http://www.cbc.ca/thecurrent/coming-up/2012/04/13/friday-bruce-livesey-on-thieves-of-bay-street/

The guy claims it takes you twice as much to invest into bank-owned investment funds comparing with OMERS/OTPP or similar plan to get the same retirement income, the reason being the exorbitant hidden fees charged by financial industry. No wonder we see the unrelenting attack on corporate pension plans from paid shills and dim-witted dupes they recruit.

[DearSummer]

Link is broken for me.

[NorthYorker]

Link is broken for me.I guess they're moving the podcast from "Current" to "Archive" now. Try googling on "Livesey Thieves Bay Street CBC".

[CantMissADeal]

http://www.cbc.ca/thecurrent/episode/2012/04/13/thieves-of-bay-street-bruce-livesey/

[projectmoonlightcafe]

Totally stupid argument. You're always going to pay more retail than wholesale. It's just common sense based on economies of scale.

[NorthYorker]

You're always going to pay more retail than wholesale. So isn't it attractive for retail outlets to campaign in order to kill structures providing services to it's members at wholesale prices?

[projectmoonlightcafe]

So isn't it attractive for retail outlets to campaign in order to kill structures providing services to it's members at wholesale prices?

It costs more to provide administration to 50000 clients with a total Assets Under Admin of 1 billion than to one client with the same AUM

[neutral]

It costs more to provide administration to 50000 clients with a total Assets Under Admin of 1 billion than to one client with the same AUM

Yeah, I don't think you are getting his point.

[neutral]

Makes total sense, and it's sad that we have a lot of slower folk who keep hearing the same lies repeated over and over by loud jackasses and think what they say is fact. The attack on the middle class continues.

[NorthYorker]

It costs more to provide administration to 50000 clients with a total Assets Under Admin of 1 billion than to one client with the same AUMSo why are administration costs for 50K teachers are so much lower than administration costs for 50K of "rest of us", that it costs twice as much contribution for ordinary me to get same pension benefits as for ordinary teacher (assuming the guy is right)? OTPP is not dealing with a single client, it deals with a group...

[Syne]

The attack on the middle class continues.

Yep. This is unprecedented. I can think of no other time in history where anyone would dream of attacking middle-class pensions. Where do these Bay Street pigs think these middle-class workers are going to go when they can't afford to live anymore? Just die alone in a corner?

[DearSummer]

You can manage your investments next to nothing if you avoid rip-offs like mutual funds and whatever crap they sell at retail banks. Anybody with even a basic understanding of investment can setup their own portfolio for a tiny fee. I'm invested in highly-diversified ETFs that charge 0.07% MER and online brokerages allow you to make stock trades for the cost of a Big Mac. That is peanuts. If you don't have the knowledge, yes, you have to pay somebody for it (like you do with everything else).

I have no problem with pension plans existing and using economies of scale to save on cost (although this rarely happens, many self-directed options only offer mutual funds). However, the issue is that public sector pension funds are definted-benefit. This is an insane concept that works backwards. It says we're going to pay you $X amount when you retire and then tries to figure out what contributions people need to make in order to meet those obligations. As you know, investment performance can't be predicted and demographic trends make this an unsustainable model. Every major public sector pension plan is currently massively underfunded. Who is going to make up the shortfall?

The solution is simple. Switch to a defined-contribution plan. Allow people to choose how their investments are managed. If they want an investment board to manage their money for them (since it saves money apparently), so be it. At the end of the day though, it is the employees who should be responsible for their pensions, not the taxpayer. If investment performance continues to lag, how is it fair to call on private sector emplyoees (whose retirements savings would already be impacted by the lack of investment performance) to pay for guaranteed pensions for public sector workers? It's a ridiculous two-tier system.

Saying that you're going to pay somebody $x amount 50 years from now is simply an unsustainable model. There is no way to predict the true cost of such a guarantee.