This is a continuation of a four-part post series which started last Thursday. Part 1 provides the background and also starts to describe how the scam is setup. You can find it here: https://www.loop.markets/how-my-retirement-fund-ripped-me-off-part-1/
Part 2 address the main part of the scam "Annual Cost" and described further measures which are used to hide the scam. You can find it here: https://www.loop.markets/how-my-retirement-fund-ripped-me-off-part-2/
On Friday we ended off on the subject of the enticing "Bonus" – a last ditch attempt to lock you into the scam. Today we'll look outside the scam company, to see how they get away with openly scamming so many people – legally. We'll end off by chatting about policy growth – the pros and cons of it, and how it's also used to mask the scam.
Industry Standards
Having uncovered the rot, and going through my documents, I started to become excited. This was a scam, and I had everything I needed to prove it! Surely I could take the company to court and sue them? At the very least, I could create a lot of noise and ruin the name of their company!
I spoke to one of my friends about this for several hours. He strongly encouraged me to contact the consumer watchdog agencies and/or the government agencies in charge of overseeing such matters.
But I couldn’t.
Why not?
Because – to my horror – I also discovered that the system which the company is using to scam me is NOT it’s own system. My fund management company didn’t develop it, it merely makes use of it.
The system itself is an industry standard!
It’s developed by the “independent” industry regulator, and is now the norm that all major companies in the retirement annuities industry use (at least in my country of residence). In fact: comparing sample documents from the regulator with documents from my own retirement fund company, I could hardly spot the difference. My company follows the regulations absolutely to the letter. How can I fault the company when it follows regulations to a T?
I have no recourse – at least not through the industry regulator – because the regulator itself is at fault. The regulator itself is the source and custodial nexus of this corrupt system. I can’t report just one company, because ALL the companies are doing it – with the express approval of the regulator.
But even if the entire industry is at fault, I still have a legal leg to stand on, right? Even if I started a class action suit against the entire industry (possibly killing off the entire national pension fund industry in the process!), I should still have the protection of the government, right?
Government Protection
Oh HELL no!
Haven’t you read my blog before? Do I not always say that political parties are a divisive distraction? Do I not always say that there is nothing democratic about a Representative Democracy? Do I not always state that governments run only on greed – greed for money and power?
I do. I do indeed.
And so is it that here – once again – we see that government has absolutely no interest in looking after its citizens. Instead, it wants money and it wants power. It wants to enrich those it loves most: it’s party funders. And it does so by regulating in favour of big money. I should not have been surprised.
I now see my pension plan for what it really is: a way to fund big money AND for my government to finance its insatiable appetite for reckless spending. My retirement fund, as it stands today – exists to pay dividends to the shareholders of my crooked retirement fund company, and to pay my government’s debts and underfunded socialist commitments.
I’m kidding, right? I’m making this up. I have a tinfoil hat on and am dreaming up weird conspiracies, aren’t I?
Maybe. But…
If that’s the case, then why is there a government act created specifically to protect my retirement fund by mandating that it be sufficiently diversified?
[Okay – so far, so good – Bit Brain has clearly lost the plot].
If that’s the case then why does this same diversification law allow three quarters of my pension fund to be invested in the stock market? Sure, you can spread it across stocks, but is that really adequate diversification?
[Hmm, alright, Bit Brain may be onto something. Not much, but he has a point.]
If that’s the case, then why must the vast majority of stocks be LOCAL stocks, not international ones? (Uh oh, sounds to me like the government is trying to mandate a bonus for those big corporations which fund local parties – the big money we just discussed.)
[Now he has a real point. I’m getting interested…]
If that’s the case, then why can my pension fund not invest more than 10% in commodities? Fair enough: commodities can be relatively volatile, BUT – they can’t just vanish like a company can, and they’re always in demand. Why can’t professional retirement fund managers buy low, sell high? Perhaps it’s because limited supply assets are difficult to directly control and manipulate – and the financial industry doesn’t benefit much from that…
[Another semi-valid point. The evidence is stacking up, but I’ve yet to see something which I could call “extraordinary”.]
If that’s the case, then why is investment in hedge funds limited to 10%? When choosing a retirement fund, the sucker investor gets to pick the level of investment risk/aggression (same thing) they feel comfortable with, so what’s the problem? Is it because the retirement fund then can’t choose which government crony companies to reward with their clients money?
[He actually has a case now. What Bit Brain says is starting to make sense.]
If that’s the case – bearing in mind that hedge funds and commodities are limited to 10% apiece, AND that this law is specifically created with diversification of the investor’s assets in mind,
THEN WHY THE F* IS MY FUND ALLOWED TO INVEST 100% IN GOVERNMENT DEBT?**
… OR 100% IN LOCAL FIAT MONEY?!
Or even up to 75% in BANK debt?
[Oh st! He just blew this whole scam wide open!**]
Yeah – government “protection”, I can surely count on that!
They’ll put an end to this entire industry of entrenched and systemic corruption – just for little old me and my $10000 policy.
Riiiiight…
I have neither the time nor the money to spend on that lost cause.
Clearly what is going on here is that the government relies heavily on pension funds to prop up its failing failed economy. The extent of this will differ from country to country, depending on how fiscally responsible each is. In the case of my government, they can’t even spell “responsibility” – think along the lines of what happened to Greece a few years ago: all socialist over-spending with no desire for austerity measures – an ever-growing budget deficit and debt-to-GDP ratio.
One more thing on this topic: were I ever to get my money out of the retirement fund (which I won’t), then I would face massive tax penalties for doing so, penalties designed specifically to deter people from doing exactly what I’m trying (but failing) to do. (In case you were wondering, those penalties exist because it is possible to withdraw retirement money under specific conditions, sadly none of which apply to me.) On the surface, it seems like a good thing that people should be discouraged from not saving for their futures, but in practise that’s a false argument which falls flat. Government is NOT doing this to protect the investors, it’s doing this to protect its fragile house-of-cards economy, and to enrich its cronies in the world of corporate finance. So much for the rights and freedoms of the individual…
One LAST thing: if I did manage to get my money out, then not only would it be taxed to hell and back, but I would also pay significant early termination penalties to the company which runs the fund. All of that on money which is legally mine – but which I have no access to – even though it is being stolen away in front of my eyes. Just thought you should know that too.
Growth – Benefits and Costs
The fact that monthly contributions are not fixed gives the company a great way to hide their administration costs. Indeed, it is only after I forcibly fixed my monthly costs (I reduced my fixed annual increase for monthly payments to 0%) that I began to see the problem – and even then, it took me a year.
When you start a new policy, by default, the monthly contributions are set to increase annually at an above-inflation rate. This strategy is sold to you – hard – by the financial advisors when you take out a new policy (including policy revisions/replacements). The sales line is that it’s in your best interests to put away as much as possible while you can afford to, and that you can always reduce payments later if need be.
What they don’t tell you is that reducing monthly payments later on incurs a penalty. As someone who did away with the annual increase last year, I can state that the process is neither easy nor smooth (my first emails were simply ignored), and that you may incur a non-trivial penalty for doing so.
But for all those who do just keep on letting their monthly contributions increase at a very rapid rate (the default rate of increase is more than twice that of the standard government inflation rate), they will struggle to notice how they are being ripped off – because they’re essentially the victims of single contributor pyramid schemes – wherein their ever-increasing contributions mask the ever-increasing administration fees.
Additional masking is achieved by the investment itself. Any half-decent economist can tell you that our stock markets have become grossly inflated in recent years. The money printing – which really took off after the US Dollar divorced Gold back in 1971 – has been driving markets ever higher in an unsustainable manner which only ever gets worse. Recent Covid money-printing pushed this into a whole new realm of over-inflation, as bailout money, QE, “not QE”, the buying of junk debt, helicopter money and other similar “stimulation” mechanisms pushed markets to new highs – IN THE MIDDLE OF A CHRONIC RECESSION! (Nothing weird about that, right?!)
Without diving down that particular rabbit hole today, let it suffice to say that just about any investment in the stock markets of today makes a decent return, even if it doesn’t deserve to do so. It is a mechanism which my fund further exploits to hide its fees and costs. Market growth is added into the equation, making it look as if your money is growing fast, even though the fund itself is only growing at what can best be described as a “conservative market average”. Make no mistake, I’m not upset that a retirement fund is relatively conservative and that growth is not stellar – a responsible retirement fund should grow slowly but steadily – all I’m saying is that the highly inflated market is generating unnatural returns, and that the fund managers know this and are using it to further hide their outrageous fees.
Looking at this setup holistically: you are paying for them to benefit from the rapid market growth. This can easily be seen by taking a look at the financials of my retirement fund’s parent company itself. The company has been paying out about four hundred thousand dollars in dividends every year for the past several years, including during the Covid years of 2020 and 2021. That money has to come from somewhere – and that “somewhere” is people like me.
See how it all works yet?
Tomorrow I aim to conclude this series with Part 4. In there will be the latest developments, as well as a conclusion which sums up what I have learnt and what I suggest others learn from my experience. Don't miss the final episode!
Yours in crypto (the predator which will consume fiat)
Bit Brain
"The secret to success: find out where people are going and get there first"
~ Mark Twain
"Crypto does not require institutional investment to succeed; institutions require crypto investments to remain successful"
~ Bit Brain
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DISCLAIMER:
I am neither a financial advisor nor a professional. This is not financial advice, investment advice or trading advice. Unless otherwise stated, all my posts are my opinion and nothing more. Crypto is highly volatile and you can easily lose everything in crypto. You invest at your own risk! Information I post may be erroneous, incomplete or construed as being misleading. I will not be held responsible for anything which is incorrect, missing, false, out-of-date or fabricated. Any information you use is done so at your own risk. Always Do Your Own Research (DYOR) and realise that you and you alone are responsible for your crypto portfolio and whatever happens to it.