Wednesday, February 10, 2010

Why your pension has been treading water

TJN senior adviser Richard Murphy is in Forbes again, looking at accounting gimmicks:

"State finances have been distorted by an inevitable boom and bust cycle. In boom years the state is paid taxes on profits that are completely illusory: this is tax paid on the current benefit of future investment returns. That creates an illusion of boom which evaporates when the returns do not live up to expectation, having been over-hyped by their purveyors in the first place. Bust follows, of course."

Read the whole short article to get the gist. And this is nicely put:

"That’s why your pension scheme has made nothing for a decade or more: a banker claimed the growth in your pension scheme as the basis for their bonus many years ago."


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