The Economists ‘Buttonwood” gets right to the point. Talking of the problems of funding acquired pension liabilities, he notes:
“There are a couple of weird circularities here. Most of the burden of filling these gaps will fall on the companies themselves, which will depress their profits. That, in turn, will depress share prices, which will make it harder to achieve adequate investment returns. And if asset managers turn en masse to bonds with long maturities to match their assets and liabilities more precisely, which is necessary especially for older plans, that will raise bond prices, depress bond yields and increase the present value of assets they must hold?again, widening the pensions gap. .”
The solution to this conundrum – both in the public and the private pensions sector – is by no means obvious.