It's not really tricky. The problem is humans aren't capable of predicting economic (nor longevity) conditions 30 years into the future (or even 5 years). There's a reason why you don't see pension like annuities being offered by insurance companies, because it's stupidly expensive to promise someone something like that.
Defined benefit pensions are ripe for corruption. Politicians get to buy votes with taxpayer money that doesn't need to be accounted for while they're in office. So you promise a bunch of unions some benefits, the union leader wins, the politician gets elected, in a few years he moves onto the state senate or wherever, rinse repeat. This is all great and easy to cover up when you have a growing tax base (i.e. large young population), but it starts to fall apart when the balance tilts the other way.
There's a pretty easy way to fix this, and that is to ban governments from making pensions. They should pay their employees in cash only, the employee can then purchase an annuity if they like for the amount of pension they have earned. Of course, they won't be able to, because it's not affordable for anyone unless the government is hiding the costs of pensions in the ridiculously high investment return assumptions.
The only silver lining is that there is a pot of dumb money sloshing around chasing higher and higher returns, so in my field it makes it a little easier to make money (heads I win, tails you [taxpayers] lose).
Defined benefit pensions are ripe for corruption. Politicians get to buy votes with taxpayer money that doesn't need to be accounted for while they're in office. So you promise a bunch of unions some benefits, the union leader wins, the politician gets elected, in a few years he moves onto the state senate or wherever, rinse repeat. This is all great and easy to cover up when you have a growing tax base (i.e. large young population), but it starts to fall apart when the balance tilts the other way.
There's a pretty easy way to fix this, and that is to ban governments from making pensions. They should pay their employees in cash only, the employee can then purchase an annuity if they like for the amount of pension they have earned. Of course, they won't be able to, because it's not affordable for anyone unless the government is hiding the costs of pensions in the ridiculously high investment return assumptions.
The only silver lining is that there is a pot of dumb money sloshing around chasing higher and higher returns, so in my field it makes it a little easier to make money (heads I win, tails you [taxpayers] lose).