Government pension funds risk becoming dry when the economy slows down, according to a recent study by The Pew Charitable Trusts.
The study, published this month, found that pension funds are in New Jersey and Kentucky Most at risk is the risk of a collapse due to a steady decline in public finance funding. In both countries, between 2000 and 2016, the amount of pension funding fell from more than 100% to just 31%.
New Jersey and Kentucky have the two least-funded state pension schemes in the country, but more pension funds nationwide The study examined the stability of pension systems in Colorado, Connecticut, North Carolina, Ohio, Pennsylvania, South Carolina and Wisconsin.
"Even after eight years of economic recovery ̵
Researchers came to their conclusions after conducting various stress tests on the effects of different economic scenarios – on the pension funds. In a situation where return on investment is lower than expected, the pension funds in New Jersey and Kentucky can be used up unless public employees take action to increase government contributions. Reducing retirement benefits is also an option, but a plan to reduce Kentucky teachers' pension benefits led to nationwide disputes earlier this year.
New Jersey has gradually increased its pension fund contributions thanks to new funding guidelines, but the report notes that full funding will be a challenge as the state's weak balance sheet provides annual contributions.
The study found that pension systems in North Carolina and Wisconsin – the country's two best-funded pension systems – were relatively healthy thanks to robust contribution schemes and a defined benefit plan designed to distribute the burden of unexpected costs to workers