Profits drop --

LONDON (Reuters) - Profits at nearly two-thirds of firms with final-salary pension schemes have been cut significantly by the impact of paying for them, according to a new survey.

The size of the drain and long term consequences for business has an easy analogy. That is, the classic example of old steel businesses in the US following World War II. The Japanese and German steel industries were rebuilt with newer more efficient steel plants. The US plants, or at least their owners, choose to take their money out of steel rather than modernize. It is no surprise that today that some of the early heavyweights saddling the Pension Benefit Guarantee Corporation are defunct steel companies.

Any student of history should note the mismatch between a fixed promise based on assumed returns, and indeed they became illegal in 1933 in the US. These were face-amount promises. They proved to be worth no more than the paper upon which they were written. The economic realities do not change, no matter the level of wishful thinking or legal support one can display. Your pensions are toast. Period.

The folks in the UK, are slowly figuring out the real cost of late career pension spiking -- there is just a lag time in recognition of the problem. The persons from whom the theft is taking place don't quite know that theft is taking place until long after it is too late.

In property law there is the concept of Adverse Possession. This is were someone can use property belonging to some else for a sustained period of ten or fifteen years; after which they can then seek a court order that they acquired the property though adverse possession. The defense is to obtain either a civil or criminal trespass action prior to the expiration of time period. The rationale is that it is not in society's best interest that land remain idle. How then is this related to pensions? Someone else is getting money today that really belongs to society at a future date. Rather, a politically savvy thief can steal money today without anyone really noticing, by calling it a pension, leaving future pension claimants with less and less resources from which to get their cut. The later pensioners are left holding the bag, but are loath to snap out of their daze because they see the great rewards obtained by earlier retirees. Don't assume the business will be their tomorrow, because it won't. This delayed recognition of lack of real value coupled with the lure of unearned wealth last occurred in the crash of 1929. The market did not hit bottom then until 4 years later. Human nature, and stubborn refusal to accept ones loses and move on, is no better today than yesterday. The bottom, this time, has not yet been hit – and it will ultimately not be in societies best interest to demand that businesses pay more to retirees than they can afford because it is not fair to everyone else. The persons who have benefited will be all gray haired farts in old-folks homes who have already spent their money on health care. Do I really need to step off into the argument as to why the health care costs are exploding today? - - simply because that is where the money is today, partly because of pension spiking and such.