Question

What is a major problem of capital funded pension systems?

Answer 1

Answer

The coming pension cris is a very big problem for everyone in the united states.The benefit plan pension system is  funded by the state govt. or the local govt. The plan or the system presumes a future rate of the return on the basic invested portfolio , also an inflation rate and even future health care cost . SO when we talk about fully funded , it may not be so.Almost all the public pension fund available in the country are assume investment return of 7% or in some cases 8% due to debt accumulated and it act as a drag for the future growth .According to the Legislative exchange council , the unfunded liability becomes 6 $ trillion if we make more realistic calculations. and it will lead to state govt. and local bodies to pay the pension at a much higher level.which is left with only two ways either taxes or service reduction.Pension fund underfunding is also a major problem of the local govt. which is about the tax payer who covers the amounts who moved to othe rstate to lower the tax burdens .The most common soluition has ben service cutting.

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