Investments returns being lower in the coming decades will be a defining factor in terms of pension funds and college endowments. When final-salary pension schemes ( which are very significant in America’s public sector employees) the decision needs to be made as to how much is put aside to pay pensions. They have to make an assumption about what returns they will earn in the future. Essentially the higher they assume the return will be the less the employers have to contribute today. Similarly endowments have to determine how much to spend every year in accordance with future predictions.
College endowments also have to make similar decisions regarding their funds for future leverage. They have to be very skeptical regarding investment assumptions.
The only good news there is from this is that it a long term issue. However; this is also a drawback since decision makers will eventually leave this problem for their successors, which will eventually make the funding crisis even larger to deal with.Link:
http://www.economist.com/news/finance-and-economics/21678812-pension-funds-and-endowments-are-too-optimistic-many-unhappy-returns
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