Pensions, markets & the baby boomer time bomb

Historical Archive

This article is preserved as part of the historical record of this blog. It reflects the author's views at the time of publication. The content has not been substantively altered, although the HTML, accessibility and formatting have been updated to meet modern web standards.

---

Since the day after the election, the news has been that things were not as good as they appeared during the campaign and were, in fact, very bad. If you had listened to Dr. Forskitt or me during the campaign, this was exactly what we had been trying to tell people despite the media blackout.

As pension monies are withdrawn from the market and paid out, a collapse in share prices is inevitable. Between 2011 and 2016 the baby boomers retire.

The latest post-election revelation was that the States Employees' Pension Fund was in deficit. Beneficiaries had already received an increase below inflation and it appeared that below-inflation rises would continue for the foreseeable future.

Likewise, the Social Security Fund was projected to be exhausted by around 2030. I questioned whether compulsory Social Security contributions represented an investment at all, arguing instead that they functioned as a tax.

I contrasted this with the performance of gold, which had risen from around US$295 to approximately US$1,800 per troy ounce during the preceding decade, while noting that no Social Security funds had been invested in precious metals.

I argued that this was not unique to Jersey, pointing to substantial unfunded pension liabilities elsewhere, including the United States.

In my view, the greatest long-term danger was not simply an ageing population but the structure of pension funds themselves. As the post-war baby boom generation entered retirement, pension funds would increasingly be forced to sell shares in order to meet pension payments, creating sustained downward pressure on equity markets unless sufficient new buyers emerged.

I also noted that companies had begun buying back their own shares, partly offsetting falling demand, but argued that this could only continue while corporate cash reserves remained available.

My conclusion was that continuing withdrawals from pension funds would place increasing pressure on share prices, reducing pension fund values and making official long-term projections appear overly optimistic.

---

Historical Archive Update

This page was updated on 27 July 2026. The content has been preserved as originally published. This update was undertaken solely to modernise the HTML markup, improve accessibility, correct obvious spelling mistakes and grammatical slips, update obsolete links where appropriate, and bring the page into line with current web standards.