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national debt and savings

  • 10-02-2005 2:25am
    #1
    Zaph0d
    Closed Accounts Posts: 756 ✭✭✭


    The national pension reserve fund is now worth nearly €11bn while national debt is around €35bn. I'm sure there is a good reason for this but I don't get it. Why would you have long term savings and long term debt? Is this not like saying you have savings of 110K in the bank for use when you retire but a mortgage of 350K? You would pay off your mortgage with the long term savings. I guess govt debt is borrowed at an extremely low rate but still?

    Can someone explain. ta


Comments

  • #2
    MG
    Closed Accounts Posts: 823 ✭✭✭MG


    Zaph0d wrote:
    I guess govt debt is borrowed at an extremely low rate but still?

    I'd imagine that's it. The pension fund gained about 9% I think while the interest rate on the debt would probably be less than half that.


  • #3
    impr0v
    Registered Users, Registered Users 2 Posts: 2,647 ✭✭✭impr0v


    I'd imagine there are political dimesions to it too. If they paid the 11bn off against the national debt and then the economy co-incidentally went into recession, they would need to borrow back a large sum for the pension reserve fund. This would make the headlines and would sound to most people like bad financial management, or a general lack of prudence on behalf of the government. The public at large immediately comprehend what a pension means, whereas they are used to the notion of a national debt without being able to see the link between it and their everyday lives.


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