European nations begin seizing private pensions

…and the legacy of socialism comes home to roost.

From The Adam Smith Blog:

Hungary, Poland, and three other nations take over citizens’ pension money to make up government budget shortfalls.

Old women eat lunch in a retirement home in Budapest Dec. 13, 2010. Hungarian lawmakers rolled back a 1997 pension reform, allowing the government to effectively seize up to $14 billion in private pension assets to reduce the budget gap while avoiding painful austerity measures.

Bernadett Szabo/Reuters/File

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id=”Facebook_like_0″>By Jan Iwanik, Guest blogger / January 2, 2011
People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends. In recent weeks I have noted five such attempts: Three situations concern private personal savings; two others refer to national funds.

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The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.

The Bulgarian government has come up with a similar idea. $300m of private early retirement savings was supposed to be transferred to the state pension scheme. The government gave way after trade unions protested and finally only about 20% of the original plans were implemented.

A slightly less drastic situation is developing in Poland. The government wants to transfer of 1/3 of future contributions from individual retirement accounts to the state-run social security system. Since this system does not back its liabilities with stocks or even bonds, the money taken away from the savers will go directly to the state treasury and savers will lose about $2.3bn a year. The Polish government is more generous than the Hungarian one, but only because it wants to seize just 1/3 of the future savings and also allows the citizens to keep the money accumulated so far.

The fourth example is Ireland. In 2001, the National Pension Reserve Fund was brought into existence for the purpose of supporting pensions of the Irish people in the years 2025-2050. The scheme was also supposed to provide for the pensions of some public sector employees (mainly university staff). However, in March 2009, the Irish government earmarked €4bn from this fund for rescuing banks. In November 2010, the remaining savings of €2.5bn was seized to support the bailout of the rest of the country.

The final example is France. In November, the French parliament decided to earmark €33bn from the national reserve pension fund FRR to reduce the short-term pension scheme deficit. In this way, the retirement savings intended for the years 2020-2040 will be used earlier, that is in the years 2011-2024, and the government will spend the saved up resources on other purposes.

It looks like although the governments are able to enforce general participation in pension schemes, they do not seem to be the best guardians of the money accumulated there.

The table below is a summary of the discussed fiscal-retirement situations (source):

*These figures do not include the costs of higher taxes, price inflation and low interest rates, which additionally devaluate retirement savings.

[This article was originally posted at mises.pl]

About Eeyore

Canadian artist and counter-jihad and freedom of speech activist as well as devout Schrödinger's catholic

5 Replies to “European nations begin seizing private pensions”

  1. I keep getting reports that people in the Obama White House is talking about doing this over here, so far it has remained talk but who knows what will happen over the next few months.

  2. Last weekend saw Christoph Blocher, founder of Switzerland’s SVP, issue a spot-on statement on fascist remarks by the EU finance chief, who claimed that “Switzerland’s insularity to the Euro zone was a geo-political absurdity.” In response to that, Blocher said that no such comments aimed at de-legitimizing the sovereignty of the Swiss nation had been heard since Hitler said that he’d “conquer the little porcupine on the way back from conquering the USSR and the rest of Europe.” And, except for the EU-loving monkeys in the Swiss French-speaking cantons of Genevastan, Neuenburg, Jura and Vaud, I don’t think there would be many people in Switzerland who could disagree with Blocher on that.

    With a general election coming up, I’d love to see those EU fascist continue to give the Swiss more reasons to vote for the SVP, the only party whose members are 100% committed to standing up to the EU, come hell or high water.

  3. In fall 2008 a Prof. Teresa Ghilarducci from New School for Social Research testified before Congress proposing that all private savings in tax-favored accounts such as 403b, 401k, IRA, be seized by the govt. and put under the aegis of the Social Security Administration. The White House and certain Congress members have conferred on this. The rationalization for it: the holders of these accounts had an unfair advantage over those who did not save. To equalize this inequity, the govt. would take charge of the money, put the value of it in the general fund and redistribute it.
    Our savings would be numbers in the SSA computers, and when we withdrew it,
    we’d be paid with dollars run off at the GPO. Resisters would be pacified by the fact that their savings would be annuitized so they would never run out of money.
    If Obama is re-elected and Congress goes to the Dems again, this will in my opinion happen. The trillions $ resting comfortably in private retirement accounts are just too tempting.

  4. I don’t see Obama being re-elected, he is going to have to defend way too many unpopular actions and victories, and I do see him try to use executive orders to nationalize the private pension plans. He and the other leftists are so arrogant they think they can do what they want with out every paying any price, and the 2010 elections didn’t change their minds.

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