HAIRCUT ON TIER-2 PRIVATE PENSION FUNDS WILL BE BAD FAITH BY GOVERNMENT
It has been in the news lately that about 94% of tier 2 private pension funds will be affected by an imminent debt restructuring by the government. If done, this would amount to bad faith by the Government and eventually will kill the goose, private pension funds, the patient long term capital, that is supposed to lay the golden eggs for economic development of the country. First, the government compulsorily paid the Temporary Pension Funds Account (TPFA) funds in government securities instead of cash to the Corporate Trustees, then reviews the private pensions investment guidelines to allow Government to off take 100% of all the funds. Now Government goes on to make the treasury bills and other government securities attractive with good yields above other investment instruments. This then naturally attracts the pension funds since they are deemed to be risk free. All of a sudden boom, a “haircut” and this will be bad faith. It is like luring a cat with fish into a cag...