Are Pensions Bad?

Are Pensions Bad?
Pensions are generally looked at as a good thing and a bit of a relic of a bygone era. Not many people get them any longer, but that is considered to be a loss, not a benefit.  However, many people do get social security (indeed, most everyone at some point) and that is simply another form of a pension.  Should we pine for the days of the pension?

So, why would a pension be a bad thing?  It’s not.  Well, not totally.  A stream of income in retirement until you move on to the next life certainly isn’t a bad thing.  However, it does have some broader negative consequences that very likely played a part in the establishment of pensions in the first place.

A pension is, at some level, a clever way to both be an attractive employer by taking care of your employees and helping to ensure your employees are less likely to build up generational wealth that will allow their future generations to join the capital class.  You can pass property, a 401k, an IRA, a bank account, etc. on to your heirs.  But, you can not pass along a pension stream or social security (except to your spouse or ex spouse).  Those die out when you die out.  So, having a large social security payment isn’t worth a whole lot.  It doesn’t build your capital base.

Historically, many large companies were controlled by one person or a family who was clearly part of the upper class.  By creating a pension system, it allowed the company and family or person to essentially control the capital that generates the income for the pension without allowing capital to truly change hands.   Maintaining control of the capital allowed them to maintain control of society and their place in it.
Many things have changed today.   Employees often have the opportunity to participate in some of the economic wealth and build generational wealth.  New companies and industries with new players form in an instant and intellectual capital is rewarded like never before.  However, it is important to take note of how enhanced economics were likely used in the past to keep people in their place. Suppression isn’t the only way to maintain class distinctions.  We still have vestiges of this with our social security system and, to a degree, the 401k industrial complex.  Again, not a bad thing, but that is not building wealth through generations.

The important thing to keep in mind is that the broader system is still not set up for you to truly build wealth.  We don’t have pensions or cradle to grave employment but you still have to constantly recognize and work towards creating wealth for you and your future generations.    Or, get a trust fund.  Those people that seem like they started the race ahead of you?  They did.
Build assets that generate income and those can list through the generations.