Over the last few decades governments have been increasingly moving retirement investing decisions away from companies and onto individuals. Unsurprisingly – at least to anyone who spends any time in the real world – this has led to a lot of poor pensioners and rich fund managers. Slowly, the world has begun to recognise that simply entrusting people with responsibility for managing their own savings is quite a dangerous thing to do: people don't behave as the models predict. Frankly people don't even behave as they themselves predict.

In response to this we're beginning to see the creation of a set of default investing options designed to remove some of the behavioural effects from the process. Amongst these is the idea of the lifestyle fund which defaults investors into a set of investment options that changes as they get older. While this is, in theory, a goodish idea, it doesn't come close to addressing a fundamental problem which is that people's wealth is constituted of both their savings and their ability to earn in future. If your job is safe as a bond then investing in shares is probably a good thing, but if it's not then the default option may be utterly non-optimal.

Democratising Poverty

Over the last couple of decades changes to accounting rules have forced companies to estimate their pension liabilities a bit more than they used to. Which isn't saying a lot, to be honest. Anyway, some of the world's largest corporations, including the majority of its airlines, have suddenly discovered that they're no longer global behemoths bestriding the world but are, in fact, glorified pension funds with small businesses tacked on the end.

Governments too are becoming uncomfortably aware that their future pension liabilities exceed their potential tax take and having paid today's pensioners with money raised from today's taxpayers are trying to figure out how to tell the latter that they've been stiffed rotten by the oldies. All of this retirement malarkey has led to politicians and corporations starting to push onto individuals the responsibility for figuring out how to save for their retirement.

It's taken a while but it's eventually become clear that this process has led to a relatively small number of fund managers looking forward to a very long and comfortable retirement and a very large number of ordinary employees looking forward to living on…

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