Lumps

The Economist | Philip Coggan | Falling short

When Gertrude Janeway died in 2003, she was still getting a monthly cheque for $70 from the Veterans Administration—for a military pension earned by her late husband, John, on the Union side of the American civil war that ended in 1865. The pair had married in 1927, when he was 81 and she was 18. The amount may have been modest but the entitlement spanned three centuries, illustrating just how long pension commitments can last.

A pension promise can be easy to make but expensive to keep.

Via P.E.Gobry, who comments:

I wonder if someone would calculate the net present value of that annuity. Given the low discount rate, I assume it’d be pretty high.

Related: if we must have pension benefits (why?) why not give them as lump-sum payments?

I think Gobry knows exactly why they aren't lump-sum payments. Because we'd be back to the unspeakable truths that many people would taste the money, and that we would be unable to protect people from the consequences of having done so.

No one is willing to give a pensioner a lump-sum because that would require them to tell all the people who were profligate with their lump to go pound sand when the money ran out.