The biggest shock of last week in the pension’s world came with the announcement from Lufthansa that their defined benefit pension scheme deficit had now gone over €10 billion. This is a frightening figure – to put it in context it is up 41% since the end of 2014 and it equals the entire national debt of Bulgaria. While some of this increase is due to the current low-interest rate policy of the European Central Bank and will be ameliorated over time, nevertheless it is still a huge problem for the company which posted an operating loss of €133 million in the first quarter of this year.
The shutdown of the US government shows what can happen when a government literally run out of taxpayers’ money and can’t spend any more. It set me wondering just how acceptable Canadians would find it, if the same principle was applied to public sector pensions. I.e. once they run out of money, the public sector would have to stop paying out, instead of being able to just rely on taxpayers to bail them out.