Bridge over ocean
1 November 2005 Financial Analysts Journal Volume 61, Issue 6

The Pension Problem: On Demographic Time Bombs and Odious Debt

  1. Robert D. Arnott

Much has been written recently, particularly after 2000–2002 left pensions in tatters, about the challenge of meeting pension obligations. The challenge discussed here is interesting and multifaceted—embracing issues of demographics, reasonable expectations, business ethics, stakeholder interests, the social compact, and intergenerational equity. The first step is to acknowledge the reality that assuming investments will earn a risk premium without acknowledging the risk that they will not deliver a premium disguises the real size of pension liabilities.

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